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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Redstonecon | LSE:REDS | London | Ordinary Share | GB00BYWN0F98 | ORD SHS 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 101.25 | 100.00 | 102.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMREDS
RNS Number : 1697M
RedstoneConnect PLC
11 October 2016
11 October 2016
RedstoneConnect Plc
("RedstoneConnect", the "Group" or the "Company")
Interim results for the six months ended 31 July 2016
RedstoneConnect (AIM:REDS), a leading provider of technology and services for smart buildings and commercial spaces, announces its unaudited interim results for the six months ended 31 July 2016.
Financial Highlights:
-- Adjusted EBITDA* up 50% to GBP0.9m (2015 H1: GBP0.6m)
-- Gross margin from continuing operations of 19% (2015 H1: 16%) an increase of 3% or 300-basis points
-- Revenue from continuing operations up 1.5% to GBP20.8m (2015 H1: GBP20.5m) -- Profit after tax from continuing operations of GBP0.8m (2015 H1: GBP0.02m) -- Cash and cash equivalents of GBP2.9m (2015 H1: overdrawn GBP0.1m)
-- Successfully raised GBP3.1m (before costs) to fund the acquisition of Connect IB Limited, March 2016
-- Continued progress evolving the Group's financial model to more annuity-based revenue streams
(*) Results for the period from continuing operations before net finance costs, depreciation, amortisation, integration and transactional items, impairment charges and share based payment charge.
Operational Highlights:
-- Successful rebranding of the Group as RedstoneConnect to reflect its renewed focus post-restructuring
-- Integration of Connect IB now complete, with the delivery of good revenue synergies including:
o Ongoing development and deployment of OneSpace, the Group's occupancy management software technology, as demonstrated by a three-year framework contract win at UBS, and our first deal under our 'per seat' SaaS pricing model
o Cross-selling opportunities for Redstone and Connect IB identified, including a contract win for the implementation of the Company's smart technology software at a major UK shopping centre
-- Group awarded 5 year GBP12m services contract extension with one of the world's leading financial institutions
-- Strong order book and new business pipeline from both new and existing customers
-- Current trading remains strong with the business performing comfortably in line with management's expectations
Post Period End Highlights:
-- Successful exit of a material legacy occupancy lease at the former head office in Stokenchurch, with more than 2 years remaining, signalling the end of the Group's restructuring
-- Awarded a contract to design a smart retail and car parking solution for Milton Keynes, one of the UK's first Smart Cities and our first 'Smart City' win
Frank Beechinor, Chairman of RedstoneConnect commented:
"I am delighted with the progress the Company has made during the six-month period to 31 July 2016, which has included the successful rebranding of the Group to RedstoneConnect. Our ability to combine the UK's leading smart infrastructure business with an exceptional software proposition, creating a compelling end-to-end client solution, has quickly resonated with customers as they seek to future proof their real estate infrastructure whilst leveraging efficiency gains and maximising revenue generating opportunities."
"RedstoneConnect continues to develop strengths in each of our core segments, concentrating on high value opportunities, as we change our business model to one with a focus on higher margin, and annuity-based recurring revenue."
"It has been Mark Braund's first reporting period as CEO and, along with Spencer Dredge as CFO, the new executive team have continued to make great progress resolving the last of our legacy issues and setting the direction for our future success."
Mark Braund, CEO of RedstoneConnect, commented:
"RedstoneConnect has produced a strong first-half performance as we continue to deliver on our strategic objectives following the refocussing of the Group. Our priorities as we move into 2017 are on working with existing and new clients to deliver high value opportunities, particularly those that will deliver higher margins and annuity-based recurring revenues. Our pipeline of sales opportunities is strong, a clear indication of our ability to leverage our traditional IT and smart infrastructure experience alongside our newer software solutions."
A copy of these interim results together with further information on the Company is available on the Company's website at: www.redstoneconnectplc.com.
Enquiries:
RedstoneConnect Plc via Vigo Communications Mark Braund (CEO) Spencer Dredge (CFO) Cantor Fitzgerald Europe (Nominated Adviser & Joint Broker) Marc Milmo/Phil Davies/Catherine +44 (0)20 7894 Leftley/Callum Butterfield 7000 Whitman Howard Limited (Joint Broker) +44 (0)207 659 Nick Lovering 1234 Vigo Communications (Financial Public Relations) Jeremy Garcia / Ben Simons / Antonia Pollock +44 (0)20 7830 reds@vigocomms.com 9700
CEO's review
I am delighted with the progress made in implementing our strategy in the first six months of the year, a period in which we have achieved a number of important milestones for the Group. The Group is transitioning towards an evolved financial model, with a stronger mix of business incorporating higher margins, recurring revenues and greater visibility of earnings. The business is now leaner and fitter, with a strong and developing proposition in each of its core markets and segments.
Our IT networking and smart infrastructure business has continued to deliver strong results and has been awarded a number of sizable contracts for key customers in the period including the award of a 5 year GBP12m services contract extension with one of the world's leading financial institutions. Elsewhere, the Group completed the initial handover of smart infrastructure at 5 Broadgate, the stunning new headquarters for UBS, a building we believe will be recognised amongst the most technologically 'smart' in Europe.
Integration of Connect IB into the business was seamless and we are delighted to welcome the team into the Group. This acquisition has given us a formidable software development capability which, in turn, will help us deliver on our strategic objective of developing IP in the Company. We appointed Keith Jump, (founder and Managing Director of Connect IB) as Group CTO, his priorities are to develop our technology stack and to work with the rest of the management team to capitalise on the significant cross-selling opportunities in our target markets. An example of this progress is the notable contract win to provide our smart retail and car parking solution at a major shopping centre complex on the south coast of England.
Our software business continues to make material gains. We announced strategically significant wins across the portfolio in the period, providing the foundation for further progress in the future.
Following the integration of Connect IB, the software development team has allowed us to accelerate the development of OneSpace, our occupancy management tool, making excellent progress in only a few months. Recent contract wins and successful pilots have been testament to the successful development of OneSpace, specifically the UBS contract win which, following a successful six-month pilot, has resulted in a master framework agreement where we anticipate OneSpace will feature globally within the UBS property portfolio. This contract has been agreed on a 'per seat per month' basis, our first Software as a Service ('SaaS') contract and a good illustration of our desire to move to a higher margin annuity revenue model.
The road map for OneSpace's development and deployment is now well defined. We have now developed this product into a unique and highly valuable solution that is relevant to many institutions seeking to better engage with their workforce and gain greater control and cost efficiency over their office-based real estate. With a number of additional pilots already deployed for clients, we anticipate the continued roll-out of OneSpace in the future into new customers.
We are seeing increasing demand and opportunity internationally for our software solutions. Our mapping and wayfinding software solution is already installed at Miami International Airport and, during the period, we saw this technology deployed at GSK's Asian headquarters in Singapore; and, more recently, OneSpace was installed for our first client in North America.
Further headway has been made post period-end, with the early exit of the lease of the former head office building in Stokenchurch. This onerous legacy lease had more than two years to run and, although a 75% provision was made against it in last year's Group accounts, the real benefit to the Group is the reduction of the associated cash outflow. The exit of the lease is a full and final exit of the property, with no further cash payable after completion of the agreement. This marked the end of the Group's restructuring, allowing complete focus on the strategic and operational opportunities to drive value going forward.
Finally, the rebranding of the Group to RedstoneConnect reflects our intention to reposition the business. The Redstone brand is well known in the markets in which we operate and the change of the Company name has been well received by both customers and investors alike.
Summary and Outlook
We continue to deliver solid progress following last year's achievements, with the Group in far better financial health with our product portfolio and customer proposition now capable of generating significant shareholder value.
Our markets continue to generate increasing levels of demand for technology driven solutions and innovative software applications. RedstoneConnect's solutions continue to lead the market in a number of key areas, with few peers able to provide the same level of end-to-end systems integrated across multiple applications. We are continuing to invest in the sales and marketing of these solutions to capitalise on this clear market opportunity. Strong growth potential exists in Smart Buildings and Smart Cities and our recent announcement of a contract as part of the wider Milton Keynes City Centre redevelopment project as it seeks to become a Smart City, is evidence of the strength of our technology and near term opportunities for growth.
Importantly, and on behalf of the board, I would like to thank the RedstoneConnect team. We have highly talented people, committed to delivering the very best solutions reliably and on time for our customers. This is a recognisable differentiator within our industry and underpins the quality of the RedstoneConnect brand.
The board is pleased to confirm that current trading remains strong with the business performing comfortably in line with management's expectations.
Mark Braund
Chief Executive Officer
11 October 2016
Financial results
The Group's financial results for the period from continuing operations include Redstone, for a full six months and Connect IB for four and a half months following its acquisition on 15 March 2016, as well as the plc overhead.
Group revenue for the period of GBP20.8m (2015 H1: GBP20.5m) continues the strong performance reported last year. Gross profit of GBP3.9m (2015 H1: GBP3.3m), was up GBP0.6m or 18% on the same period last year. This increase clearly highlights the progress we are making in changing the revenue mix to higher margin products and services. The blended gross margin reported in the period of 19% is 300-basis points higher than the same period last year benefiting from the positive impact of our high margin suite of software products alongside the margin improvement initiatives applied to the rest of the business.
Group administrative expenses during the period were GBP3.0m (2015 H1: GBP2.7m), an increase on the prior period, predominantly as a result of the acquisition of Connect IB.
EBITDA* for the period from continuing operations was GBP0.9m (2015 H1: GBP0.6m).
During the period the Group recorded a credit to the Income Statement of GBP0.3m of integration and transactional items (2015 H1: charge of GBP0.3m). These expenses are classified as one-off in nature and comprise: GBP0.4m reversal of property provisions net of related fees (2015 H1: GBP0.3m) and costs associated with deal activity and integration GBP0.1m (2015 H1: GBP0.1m).
The solid EBITDA performance from continuing operations of GBP0.9m (2015 H1: GBP0.6m) flowed down to the operating level, with operating profit of GBP0.8m (2015 H1: GBP0.1m) as a result of depreciation, amortisation and share based payments of GBP0.4m being off-set by a credit of GBP0.3m of integration and transactional items.
There was a profit recorded from discontinued operations in the period of GBP0.4m (2015 H1: loss of GBP1.2m). This profit is a result of the ongoing corporate rationalisation, where previously disposed and now discontinued businesses are being liquidated.
As a result of the performance from the continuing operations and non-cash Balance Sheet items being written back in the discontinued operations, the consolidated comprehensive income attributable to equity holders in the period was GBP1.2m (2015 H1: loss of GBP1.2m).
Basic earnings per share from continuing operations was 0.05p (2015 H1: loss per share 0.06p).
Connect IB
These Group results include the Connect IB trading performance following the acquisition in March 2016, contributing 4.5 months' trade to these interim results. During this period, Connect IB has had a dual focus, servicing both its own clients and developing the OneSpace product.
Connect IB results will be recorded in the segmental reporting in the software applications segment.
The segmentation reporting which has been adopted in these interim results is aligned to how the Board has been reviewing the business during the period and reflects a shift from how the Group accounts have previously been reported, this is a result of the successful restructuring of the Group and acquisition of Connect IB. The segmentation will now follow the separate business areas as follows: Systems Integration, which represents our design and build of smart building infrastructure, the revenues being one-off projects in nature; Services, which accounts for our Managed Services and Maintenance business, the revenues of which are typically recurring in nature; and Software Applications, which typically represent both licence and SaaS-based revenues.
This approach to the segmentation of the Group facilitates the integration of the two businesses into one cohesive proposition, with software applications as an addition to the core Redstone operation of previous periods.
Systems Integration
Project revenues and related profits include a wide variety of systems integration activities, from structured cabling through to smart buildings and new emerging technologies as they come to market. During the period, revenues relating to projects of GBP12.5m were flat against the prior period (2015 H1: GBP12.5m), but with improved gross profit of GBP1.7m (2015 H1: GBP1.5m) at 14% gross margin (2015 H1: 12%). Overheads were GBP0.1m higher in the period, resulting in an EBITDA contribution of GBP0.3m (2015 H1: GBP0.2m).
Services
Services revenue of GBP7.7m (2015 H1: GBP8.0m) was GBP0.3m lower than the prior period. This gave rise to a gross profit of GBP1.7m (2015 H1: GBP1.8m). Overheads of GBP0.8m (2015 H1: GBP0.9m) resulted in EBITDA in the period of GBP0.9m which was flat against the prior period (2015 H1: GBP0.9m).
Software Applications
The performance in this segment does not have a prior period comparable, as the trade has come from the acquisition of Connect IB and the commercialisation of the Redstone OneSpace software application which did not contribute to the prior period performance.
Revenues recorded in the period of GBP0.6m include the revenue recognised from the master framework agreement with UBS, alongside four and half months of contribution from Connect IB.
As a result of the higher margin profile of our software solutions, the segment achieved a gross profit of GBP0.5m, at a gross margin of 82%.
Segmental overheads incurred during the period of GBP0.4m resulted in an EBITDA contribution to the Group of GBP0.1m.
Group overhead
The Group's overhead of GBP0.5m (2015 H1: GBP0.4m) is slightly higher than the prior period as a result of investment in personnel to support the Group's strategy.
Changes in Equity
The Group's net assets of GBP13.4m have improved from the GBP8.9m at the start of the period, as the proceeds of the share issue in March, strong trading during the period and the positive impact from the restructuring efforts and early exit from the Stokenchurch lease all contributed to strengthening the Group's Balance Sheet.
Banking
During the period we formalised the banking arrangement with Barclays Bank. Previously the Group had a floating GBP2m facility. This is now a three year fixed GBP2.5m arrangement expiring in 2019.
Cash Flow
Cash generated by operations before movements in working capital in the first half amounted to GBP0.6m (2015 H1: cash absorbed of GBP0.8m). Investment in working capital of GBP1.9m (2015 H1: GBP3.4m), of which GBP2.2m (2015 H1: GBP1.9m) is in receivables and a direct result of the Redstone activity levels during the period, resulted in net cash used in operations of GBP1.3m (2015 H1: GBP4.2m).
Cash outflows from investing activities during the period of GBP1.3m (2015 H1: inflow GBP2.5m) includes the acquisition of Connect IB for GBP1.0m in cash and a further investment in fixed and intangible assets of GBP0.3m (2015 H1: GBPnil).
Cash flows from financing activities in the period of GBP4.5m (2015 H1: GBP2.0m) comprise the proceeds from a placing in March 2016, raising GBP2.9m after expenses and GBP1.5m from the facility drawdown, net a small amount of loan repayment.
The increase in available funds in the period of GBP1.9m (2015 H1: GBP0.3m) has resulted in GBP2.9m (2015 H1: overdrawn GBP0.1m) of cash and cash equivalents available to the Group at the reporting date.
Consolidated Income Statement
For the six months ended 31 July 2016
Hot Features
Premium
Six Six
months months Year
to 31 to 31 ended
July July 31 January
2016 2015 2016
Unaudited Unaudited Audited
Note GBP000 GBP000 GBP000
----------------------------------- ----- ---------------- ------------------ ---------------
Continuing operations
Revenue 4 20,810 20,526 40,098
Cost of sales (16,918) (17,247) (33,148)
---------------- ------------------ ---------------
Gross profit 3,892 3,279 6,950
Administrative expenses (3,016) (2,654) (5,662)
---------------- ------------------ ---------------
Adjusted EBITDA* 876 625 1,288
Integration and transactional costs 340 (326) (1,439)
Depreciation (195) (185) (370)
Amortisation (153) (25) (128)
Share based payment charge (40) (28) (47)
Impairment charge - - -
----------------------------------- ----- ---------------- ------------------ ---------------
Operating profit/(loss) 828 61 (696)
Net finance income/(expense) 5 (38) (63)
Profit/(loss) for the period
before tax 833 23 (759)
----------------------------------- ----- ---------------- ------------------ ---------------
Taxation 7 - 63
---------------- ------------------ ---------------
Profit/(loss) for the period
after tax 840 23 (696)
----------------------------------- ----- ---------------- ------------------ ---------------
Profit/(loss) from discontinued
operations, net of tax 5 401 (1,225) (1,487)
----------------------------------- -----
Profit/(loss)for the period 4 1,241 (1,202) (2,183)
----------------------------------- ----- ---------------- ------------------ ---------------
Total comprehensive profit/(loss)
for the period attributed to equity
holders 1,241 (1,202) (2,183)
------------------------------------------ ---------------- ------------------ ---------------
Basic and diluted earnings/(loss)
per share
Continuing operations 7 0.05p 0.00p (0.06)p
Discontinued operations 7 0.03p (0.11)p (0.12)p
Total 7 0.08p (0.11)p (0.18)p
----------------------------------- ----- ---------------- ------------------ ---------------
(*) Results for the period from continuing operations before net finance costs, depreciation, amortisation, integration and transactional items, impairment charges and share based payment charge.
The profit/(loss) for the period equates to the comprehensive income/(expense) for the period.
Consolidated Statement of Financial Position as at 31 July 2016
31 July 31 July 31 January
2016 2015 2016
Unaudited Unaudited Audited
ASSETS GBP000 GBP000 GBP000
Non-current assets
Goodwill 9,544 9,074 8,724
Other intangible assets 1,616 112 309
Property, plant and equipment 543 1,068 637
11,703 10,254 9,670
------------------------------- ---------- ---------------- -----------------
Current assets
Inventories 152 204 181
Trade and other receivables 10,398 12,346 7,982
Cash and cash equivalents 2,954 879 2,430
13,504 13,429 10,593
------------------------------- ---------------- -----------------
Total assets 25,207 23,683 20,263
------------------------------- ---------- ---------------- -----------------
EQUITY and LIABILITIES
Capital and reserves attributed to
equity shareholders
Share capital 3,675 3,432 3,436
Share premium 32,452 29,430 29,463
Merger reserve 1,911 1,911 1,911
Reverse acquisition reserve (4,236) (4,236) (4,236)
Accumulated deficit (20,383) (20,702) (21,664)
Total equity 13,419 9,835 8,910
------------------------------- ---------- ---------------- -----------------
Current liabilities
Overdraft 45 996 1,383
Borrowings 104 - -
Trade and other payables 9,606 11,909 8,503
Provisions 136 943 676
9,891 13,848 10,562
------------------------------- ---------- ---------------- -----------------
Non-current liabilities
Deferred tax 240 - -
Borrowings 1,500 - -
Provisions 157 - 791
------------------------------- ---------- ---------------- -----------------
Total liabilities 11,788 13,848 11,353
------------------------------- ---------- ---------------- -----------------
Total equity and liabilities 25,207 23,683 20,263
------------------------------- ---------- ---------------- -----------------
Consolidated Statement of Cash Flows
For the six months ended 31 July 2016
Six months Six months Year ended
to 31 July to 31 31 January
2016 July 2015 2016
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Cash flows from operating
activities
Profit/(Loss) 1,241 (1,202) (2,183)
Depreciation 195 301 531
Amortisation 153 113 218
Share based payments 40 28 47
Net finance costs (5) 39 63
Taxation (7) (285) (482)
Movement in provisions (1,085) 65 589
Loss on sale of fixed assets - 24 24
Loss on sale of discontinued
operation, net of tax 40 99 576
Operating cash flows before
movements in working capital 572 (818) (617)
------------------------------------ ------------ -------------------- ----------------------
Decrease in inventories 29 8 32
(Increase)/decrease in receivables (2,201) (1,936) 2,394
Increase/(decrease) in payables 285 (1,437) (4,543)
Operating cash flows after
movements in working capital (1,315) (4,183) (2,734)
------------------------------------ ------------ -------------------- ----------------------
Tax paid - - 49
Net cash used in operating
activities (1,315) (4,183) (2,685)
------------------------------------ ------------ -------------------- ----------------------
Cash flows from investing
activities
Disposal of Telephony Services
business and assets - 2,500 2,500
Acquisition of subsidiaries
(net of cash acquired) (978) - -
Acquisition of intangibles
assets (223) - (355)
Proceeds from sale of property,
plant and equipment - 23 23
Acquisition of property, plant
and equipment (83) (64) (56)
Net cash used in investing
activities (1,284) 2,459 2,112
------------------------------------ ------------ -------------------- ----------------------
Cash flows from financing
activities
Proceeds from issues of share
capital (net of issue costs) 2,978 2,031 2,069
Borrowings (net of repayments) 1,478 - -
Net finance costs 5 (38) (63)
Net cash from financing activities 4,461 1,993 2,006
------------------------------------ ------------ -------------------- ---------------------- Net increase in cash and cash equivalents 1,862 269 1,433 Cash and cash equivalents at start of period 1,047 (386) (386) ------------------------------------ ------------ -------------------- ---------------------- Cash and cash equivalents at end of period 2,909 (117) 1,047 ------------------------------------ ------------ -------------------- ----------------------
Consolidated Statement of Changes in Equity
For the six months ended 31 July 2016
Share premium Reverse
Share / merger acquisition Accumulated
capital reserve reserve deficit Total
--------------------- -------------- ------------------------ ---------------- ----------------- ---------------
At 1 February
2015 3,015 29,727 (4,236) (19,528) 8,978
Loss for the
period - - - (1,202) (1,202)
Transactions with the
owners:
Proceeds from
shares issued 417 1,665 - - 2,081
Share issue costs - (50) - - (50)
Share based payment
charge - - - 28 28
--------------------- -------------- ------------------------ ---------------- ----------------- ---------------
At 31 July 2015 3,432 31,342 (4,236) (20,702) 9,835
Loss for the
period - - - (981) (981)
Transactions with the
owners:
Proceeds from
shares issued 4 32 - - 36
Share based payment
charge - - - 19 19
--------------------- -------------- ------------------------ ---------------- ----------------- ---------------
At 31 January
2016 3,436 31,374 (4,236) (21,664) 8,910
Profit for the
period - - - 1,241 1,241
Transactions with the
owners:
Proceeds from
shares issued 239 3,136 - - 3,375
Share issue costs - (147) - - (147)
Share based payment
charge - - - 40 40
--------------------- -------------- ------------------------ ---------------- ----------------- ---------------
At 31 July 2016 3,675 34,363 (4,236) (20,383) 13,419
--------------------- -------------- ------------------------ ---------------- ----------------- ---------------
Notes to the Interim Financial Information
1. Basis of Preparation
The unaudited interim report for the six months to 31 July 2016 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the year ended 31 January 2016 are extracted from the statutory financial statements which have been reported on by the Company's auditor, KPMG LLP, and have been delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified and did not contain statements under Section 498 to 502 of the Companies Act 2006.
The consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards and on the historical cost basis, using generally recognised accounting principles consistent with those used in the annual report and accounts for the year ended 31 January 2016 and expected to be used for the year ending 31 January 2017.
This interim report for the six months to 31 July 2016, which complies with IAS 34 'Interim Financial Reporting', was approved by the Board on 11 October 2016.
Hard copies of this interim report are available from the Company at its registered office at 40 Holborn Viaduct, London, EC1N 2PB. This interim report will also be made available on the Company's website, www.redstoneconnectplc.com.
2. Significant Accounting Policies
The accounting policies and methods of computation applied are consistent with those of the annual nancial statements for the year ended 31 January 2016, as described in those annual nancial statements.
3. Business Combinations
On 15(th) March 2016, RedstoneConnect acquired 100% of the share capital of Connect IB Limited ("Connect") for a total consideration of GBP1.328 million. Deal costs of GBP41,000 were incurred and recorded under integration and transactional items in the Income Statement. The transaction was satisfied by GBP1.028 million in cash and GBP300,000 in equity. The cash element of the consideration was financed out of the placing of 223,214,286 new ordinary shares of 0.1p each at a price of 1.4p per share, raising GBP3.125 million, before expenses. Equity consideration was satisfied by, 15,422,579 Ordinary shares of 0.1p and deferred equity consideration of 3,084,516 Ordinary shares of 0.1p each, both at a price of 1.62 pence per share.
The acquisition of Connect is in line with RedstoneConnect's strategy of driving its core Redstone business through both organic and acquisitive growth. In addition, Connect creates significant synergies for the enlarged group in terms of potential new clients for RedstoneConnect and additional products that can be sold across Redstone's existing customer base.
The book value of the Connect net assets acquired and their fair values are summarised below:
Fair Fair
Book value value
Value Adjustments to Group
GBP000 GBP000 GBP000
--------------------------------- -------- ------------- ----------
Intangible assets - 1,236 1,236
Property, plant and equipment 19 - 19
Current assets 454 (149) 305
Current liabilities (1,050) 245 (805)
Deferred tax liability - (247) (247)
---------------------------------- -------- ------------- ----------
(577) 1,085 508
--------------------------------- -------- ------------- ----------
Fair value of net assets
acquired 508
Goodwill 820
---------------------------------- -------- ------------- ----------
Total consideration 1,328
---------------------------------- -------- ------------- ----------
Shares issued at market
value 250
Cash 1,028
Contingent equity consideration 50
1,328
Cash consideration 1,028
Less: cash acquired (50)
---------------------------------- -------- ------------- ----------
Total cash consideration,
net of cash acquired 978
On acquisition the RedstoneConnect Plc directors assessed the business acquired to identify any intangible assets. Customer contracts and related relationships, and Intellectual Property ("IP") 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. For the customer contracts and related relationships the provisional fair value of the intangible assets was calculated by using the discounted cash flows arising from the existing annuity base of support, maintenance and hosting revenues. Attrition rates of 10% were applied, discount rates of 15%, and the reasonable economic life of the customer relationships was assumed to be 10 years. In the case of the IP a relief from royalty method was used to calculate the fair value of the Intangible asset using a 12.5% royalty rate, and a 15% discount rate.
The identifiable intangible assets and related deferred tax liability are as follows:
Fair value
to Group
GBP000
------------------------- -------- ---- ------------
Customer contracts 606
IP 630
Deferred tax liability (247)
------------------------------------------- -----------
4. Segmental Analysis
In the opinion of the Directors the Group's activities comprise the following business segments which reflect the profiles of the risks, rewards and internal reporting structures within the Group:
-- Systems Integration -- Services -- Software Applications -- Group overhead -- Discontinued operations - Telephony Services & Darkside Studios
Trading activities were conducted within the United Kingdom and it is the opinion of the Directors that this represents one geographical segment.
Six months Six months Year ended
to 31 to 31 31 January
July 2016 July 2015 2016
Unaudited Unaudited Audited
Revenue GBP000 GBP000 GBP000
------------------------- ------------ ----------- ------------
Systems Integration 12,473 12,478 23,823
Services 7,733 8,048 16,275
Software Applications 604 - -
------------------------- ------------ ----------- ------------
Continuing operations 20,810 20,526 40,098
Discontinued operations - 5,100 5,343
--------------------------
20,810 25,626 45,441
------------------------- ------------ ----------- ------------
Year
Six months Six months ended
to 31 to 31 31 January
July 2016 July 2015 2016
Unaudited Unaudited Audited
Profit/(Loss) for
the period GBP000 GBP000 GBP000
------------------------- ----------- --------------- ------------
Systems Integration 253 125 341
Services 668 719 1,429
Software Applications 129 (5) (10)
Group overhead (210) (816) (2,456)
-------------------------- ----------- --------------- ------------
Continuing operations 840 23 (696)
Discontinued operations 401 (1,225) (1,487)
--------------------------
1,241 (1,202) (2,183)
------------------------- ----------- --------------- ------------
5. Discontinued Operations
Discontinued operations reflect the results of the Telephony Services division for the four months to 31 May 2015 when it was sold to Timico Limited, and the Media division up until the Management Buy Out in December 2015.
Results from discontinued operations
Six months Six months Year
to 31 to 31 ended
July July 31 January
2016 2015 2016
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
-------------------- -----------------
Discontinued operations
Revenue - 5,100 5,343
Cost of sales - (3,868) (4,264)
-----------------
Gross profit - 1,232 1,079
Administrative expenses (1) (2,130) (2,791)
-----------------
Adjusted LBITDA* (1) (898) (1,712)
Integration and transactional
costs included within administrative
expenses 402 (407) 2,269
Depreciation - (116) (161)
Amortisation - (88) (90)
Impairment charge - - (2,212)
--------------------------------------- -------------- -------------------- -----------------
Operating Profit/(loss) 401 (1,509) (1,906)
Net finance costs - (1) -
Profit/(loss) for the period before
tax 401 (1,510) (1,906)
--------------------------------------- -------------- -------------------- -----------------
Taxation - 285 419
Profit/(loss) for the period 401 (1,225) (1,487)
--------------------------------------- -------------- -------------------- -----------------
Total comprehensive loss for the
period attributed to equity holders 401 (1,225) (1,487)
--------------------------------------- -------------- -------------------- -----------------
Basic and diluted loss per share
Total 0.03p (0.11)p (0.12)p
--------------------------------------- -------------- -------------------- -----------------
(*) Results for the period from continuing operations before net finance costs, depreciation, amortisation, integration and transactional items, impairment charges and share based payment charge.
Cash flows from / (used) in discontinued operations
Six months Six months Year ended
to July to July 31 January
2016 2015 2016
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
---------------------------- ----------- -------------------- ------------
Net cash flow used in
operating activities (8) (2,440) (1,729)
Net cash used in investing
activities - 2,493 2,488
Net cash from financing
activities - - -
Net cash flow for the
period (8) 53 759
---------------------------- ----------- -------------------- ------------
6. Integration and Transactional items
Six months
Six months to July to July
2016 2015
---------------------- ----------------------------------------------------------- ----------
GBP000 GBP000
Integration costs (783) 203
Transactional items 41 530
---------------------- ----------------------------------------------------------- ----------
(742) 733
---------------------- ----------------------------------------------------------- ----------
The integration costs include both employee and other restructuring costs such as provisions in respect of onerous contracts. Employee costs include salary, redundancy and other exit costs. The integration costs of (GBP783,000) are for the consolidated results, with the split being (GBP381,000) continued operations and (GBP402,000) discontinued operations. The integration costs include the unwind of provisions made during the year ended 31(st) January 2016 in respect of the Stokenchurch property, following the successful conclusion of negotiations to exit the lease more than two years early which completed in August 2016.
7. Earnings/(loss) per Share
Continuing Discontinued
Six months to 31 July 2016 operations operations Total
------------------------------------ ------------------ ----------------- ----------------------
Basic and diluted earnings
per share 0.05p 0.03p 0.08p
Profit for the period attributable
to
owners of the parent company
(GBP000) 840 401 1,241
------------------------------------ ------------------ ----------------- ----------------------
Continuing Discontinued
Six months to 31 July 2015 operations operations Total
------------------------------------ ------------------ ----------------- ----------------------
Basic and diluted earnings
per share 0.00p (0.11)p (0.11)p
Profit for the period attributable
to
owners of the parent company
(GBP000) 23 (1,225) (1,202)
------------------------------------ ------------------ ----------------- ----------------------
Continuing Discontinued
Year ended 31 January 2016 operations operations Total
------------------------------------ ------------------ ----------------- ----------------------
Basic and diluted loss per
share (0.06)p (0.12)p (0.18)p
Loss for the period attributable
to
owners of the parent company
(GBP000) (696) (1,487) (2,183)
------------------------------------ ------------------ ----------------- ----------------------
31 July 31 July 31 January
2016 2015 2016
Number of shares No. No. No.
------------------------------------ ------------------ ----------------- ----------------------
Weighted average ordinary
shares in issue 1,574,166,044 1,071,748,731 1,232,295,941
Weighted average potential
diluted shares in issue 1,574,166,044 1,071,748,731 1,232,295,941
------------------------------------ ------------------ ----------------- ----------------------
8. Called up Share Capital
The issued share capital as at 31 July 2016 was: 1,633,169,664 Ordinary Shares of 0.1p each (31 July 2015 - 1,389,532,799; 31 January 2016 - 1,394,532,799); 127,144,044 deferred shares of 1p each (31 July 2015 - 127,144,044; 31 January 2016 - 127,144,044) and 770,714,046 deferred shares of 0.1p each (31 July 2015 - 770,714,046; 31 January 2016 - 770,714,046).
The movement during the six months ended 31 July 2016 is as a result of the placing of 223,214,286 Ordinary Shares at a price of 1.4p per share and issuing a further 15,422,579 Ordinary Shares at a price of 1.62p per share as part consideration for the acquisition of Connect IB, the new equity was issued in March 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFFIILLILIR
(END) Dow Jones Newswires
October 11, 2016 02:00 ET (06:00 GMT)
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