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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tax Systems | LSE:TAX | London | Ordinary Share | GB00BDHLGB97 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 112.50 | 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
TIDMTAX
RNS Number : 6486C
Tax Systems PLC
19 April 2017
Tax Systems plc
("Tax Systems", the "Group" or the "Company")
Audited Results for the year ended 31 December 2016
Tax Systems plc (AIM: TAX), a leading supplier of corporation tax software and services, is pleased to announce its audited results for the year ended 31 December 2016.
Highlights
-- Acquisition of Tax Computer Systems Limited on 26 July 2016 for an enterprise value of GBP73m
-- GBP75m of new capital raised during the year to fund the acquisition, transaction costs, working capital and future growth:
- Oversubscribed placing of new ordinary shares raising GBP45m - New bank facilities of GBP20m - GBP10m unsecured loan notes issued to the Business Growth Fund plc
-- Revenue for the year of GBP5.8m, representing the trading of Tax Computer Systems Limited for the five months from date of acquisition to 31 December 2016
-- EBITDA(1) for the year was GBP2.7m -- Cash(2) of GBP4.2m and net debt(3) of GBP24.4m as at 31 December 2016 -- New Board and senior management team with strong track record of delivery recruited
-- Significant investment made into leadership, software engineering and development teams and methodology to maintain and enhance the software portfolio
-- Post year end strategic acquisition of OSMO Data Technology Limited, a provider of automated data extraction software that connects to 295 versions of accounting packages, on 3 April 2017 for GBP3.2m in shares
1 EBITDA is defined as operating profit or loss before exceptional items, depreciation, amortisation and share-based payments
2 Cash includes GBP2m of cash held in a solicitor escrow account in connection with the acquisition of Tax Computer Systems Limited
3 Net debt is defined as bank borrowings and loan notes recognised as liabilities and the equity element of the loan notes recognised in equity less cash
Gavin Lyons, CEO, commented:
"I'm pleased to present Tax Systems' first set of results as a leading supplier of corporation tax software and services, which represent a period of significant change for the Company. In July 2016 we completed the acquisition of Tax Computer Systems Limited, a business which represents a strong and stable platform from which to build a tax software and services business of scale. Since then we have invested significantly into new senior management and software development and go to market teams. We remain confident in the ability of the business to deliver shareholder value over the coming years. I look forward to 2017 and beyond with excitement."
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
Tax Systems plc
Gavin Lyons, Chief Executive Officer +44 20 3845 3552
MXC Capital Markets LLP (Financial Adviser)
Marc Young/Charlotte Stranner +44 20 7965 8149
finnCap Limited (Nomad and Broker)
Jonny Franklin-Adams/James Thompson (Corporate Finance) +44 20 7220 0500
Tim Redfern/Richard Chambers (Corporate Broking)
About Tax Systems Plc
Tax Systems plc is a leading provider of corporation tax software and services in the UK and Ireland. The business has a long track record of being a key supplier of corporation tax software and services to many of the largest companies and the accounting profession in the UK and Ireland.
Chairman's Statement
These financial statements provide the first opportunity to report to shareholders on the performance of Tax Systems for the year ended 31 December 2016. These are also the first results of the Group since the acquisition of Tax Computer Systems Limited ("TCSL") (the "Acquisition") in July 2016.
In summary, the integration of the acquired business has been successfully completed as planned. Clients have been retained, new senior management have been added to an already successful operational team and product development initiatives are well underway.
The process of introducing greater automation into the tax reporting process has begun with the acquisition of OSMO Data Technology Limited ("OSMO") at the beginning of April and will continue with further targeted acquisitions and internally generated product enhancements and developments.
In April 2017, we were pleased to announce that Gavin Lyons became the Chief Executive Officer having formerly held the position of Executive Chairman. At the same time, we announced a number of other board changes. I became the Non-Executive Chairman, Kevin Goggin was appointed Chief Financial Officer, with Grahame Benson, the previous Finance Director and COO, stepping down and Paul Gibson joined the Board as a Non-Executive Director. I am very pleased to welcome Kevin and Paul to the Board, both of whom have strong backgrounds in the technology sector, and wish Grahame all the best for his future endeavours.
Gavin Lyons and his management team fully understand the opportunities the Company enjoys and have the backing of the Board and the Company's leading shareholders to use the Group's strong competitive position as a base to deliver growth in the years to come. This growth, in the UK, Ireland and potentially overseas, is set to be technology led as the pace of increasing automation of the tax reporting and compliance process quickens.
I look forward to updating shareholders further over the coming months with news of our progress.
Annual General Meeting
The Annual General Meeting of the Company will be held on 14 June 2017 at 11a.m. at the offices of K&L Gates, One New Change, London EC4M 9AF.
Clive Carver
Non-Executive Chairman
Chief Executive Officer's Review
As an investment company, Eco City Vehicles plc ("ECV"), the Company's previous name, the stated strategy was to invest in and/or acquire companies in the technology sector where there are opportunities for growth which, if achieved, would enhance earnings for shareholders.
TCSL was acquired for GBP73 million in cash which was funded via a placing of new ordinary shares, raising GBP45 million, senior debt from HSBC plc, raising GBP20 million and debt from the Business Growth Fund plc ("BGF"), raising GBP10 million.
The Acquisition was a reverse takeover under the AIM Rules for Companies and, following shareholder approval, the
Company was re-admitted to AIM on 26 July 2016 and changed its name to Tax Systems plc.
The first five months of operation have demonstrated that our employees, customers and core intellectual property are of the highest calibre and I would like to thank everyone for their contribution since the Acquisition completed. The business has required investment in people, processes, systems and infrastructure, which was known to us at the time of the Acquisition, and I am pleased with the way employees have embraced change. As a team we are all excited about the future.
There are several challenges for our customers' tax department which in broad terms fall into three categories - managing tax risk and audit, leveraging tax data and automating as much of the end to end tax process as possible.
Tax departments need to be able to provide meaningful tax intelligence so that effective decisions regarding tax risk can be made and to ensure businesses remain compliant with tax regulations and filing requirements while driving as much efficiency and automation into their tax processes. The government's policy of 'Making Tax Digital' by 2020 is a key driver for the Group. This will require organisations to submit quarterly reports rather than an annual tax return which will force many companies to evaluate how they manage their process as it will place a substantial strain on resources to move from annual to quarterly reporting.
Our vision to help tax departments has been broken down into technology component parts and, to achieve this goal, we will execute a buy, build or borrow strategy. The maturing of digitalisation and digital ecosystems means that we do not have to develop every component ourselves - it provides us the opportunity to utilise other technologies which we would consider non-core but are still required to deliver an end to end customer solution.
The number one priority was finding a solution to help organisations automatically collect data as it is the first point in the end to end tax process and we decided to buy that technology component which we consider to be a critical building block. Our acquisition of OSMO on 3 April 2017 is the first step towards our vision of improved automation of the tax process. OSMO was acquired in return for the issue of 4,701,492 new ordinary shares in the capital of the Company. At the previous day's mid closing price, this valued OSMO at GBP3.2 million.
OSMO is a leading provider of automated data extraction services that connects to 295 versions of accounting systems; cloud, on premise and enterprise, with new ones being continually added. Using OSMO's technology, finance and tax teams can reduce the time spent on manual inputs and rekeying of data by automating the collection of data from their accounting systems. This will significantly reduce the manual workload for finance and tax teams thus increasing efficiency and cost savings. OSMO's products are ideal add-ons to the existing software and services that Tax Systems already provides.
Outlook
The Group continues to focus on executing its vision for an end to end solution for tax departments to manage tax risk and audit, leverage tax data and automate as much of the tax process as possible. This will be achieved through the development of its own software solutions and services as well as complementary acquisitions or borrow (OEM) deals. The route to market and opportunity to grow is via the existing customer base, new customers in the UK and Ireland and then geographical expansion.
We believe we have the right business platform from which to grow, in no small part thanks to the hard work and diligence of our people, whom I would like to thank for their dedication and contribution to the ongoing success of the business.
The Board remains confident in the ability of the business to deliver increasing shareholder value over the coming years. I look forward to 2017 and beyond with excitement.
Gavin Lyons
Chief Executive Officer
Financial Review
I am pleased to report the results of Tax Systems for the year ended 31 December 2016.
The year ended 31 December 2016 has been a transformational year for the Company with its transition from an investing company to becoming a leading supplier of tax software and services following the acquisition of TCSL on 26 July 2016.
The results for the year ended 31 December 2016 are comprised of the results for Tax Systems plc for the full year together with the results for TCSL for the five-month period from the date of Acquisition.
Revenue and gross margin
Revenue for the year to 31 December 2016 amounted to GBP5.8m (2015: GBPnil) from a mixture of software sales and services mostly to large blue-chip corporates and major accountancy firms. 87% of revenue is derived in the UK with the balance from Ireland.
Sales of annually renewable software licences amounted to GBP5.0m, representing 86% of total revenue. This revenue stream provides the Group with a strong recurring revenue model. The Group's services revenue for the period from Acquisition was GBP0.8m.
Gross profit amounted to GBP5.4m (2015: GBPnil) after accounting for cost of sales which comprised of directly attributable staff costs and third-party hosting costs. The gross margin is 93%.
Operating costs
Total operating costs for the year were GBP8.6m (2015: GBP0.3m). The increase was largely driven by the operating costs of
TCSL, GBP3.3m of transaction and restructuring costs associated with the Acquisition and amortisation and depreciation of GBP2.6m in respect of acquired intangible assets.
Hot Features
Premium
2016 2015
GBP'000 GBP'000
------------------------------- -------- --------
Other administrative expenses 2.7 0.2
Transaction and restructuring
costs 3.3 0.1
Amortisation and depreciation 2.6 -
------------------------------- -------- --------
Total operating costs 8.6 0.3
------------------------------- -------- --------
The other administrative expenses of GBP2.7m relate to the overhead costs of TCSL which principally include staff and premises costs.
Operating loss and EBITDA
The operating loss for the year was GBP3.2m (2015: GBP0.3m).
The Directors use EBITDA as a non-GAAP measure in order to assess the underlying performance of the Company. This is considered to be the most relevant measure of the performance of the Group. EBITDA is defined as operating profit or loss before exceptional items, depreciation, amortisation and share-based payments.
EBITDA amounted to GBP2.7m (2015: loss GBP0.2m) for the year.
A reconciliation of operating loss to EBITDA is as follows:
2016 2015
GBP'000 GBP'000
------------------------------- -------- --------
Operating loss (3.2) (0.3)
Amortisation and depreciation 2.6 -
Transaction and restructuring
costs 3.3 0.1
------------------------------- -------- --------
EBITDA 2.7 (0.2)
------------------------------- -------- --------
Net finance costs
Net finance costs for the year amounted to GBP0.8m (2015: GBPnil), principally made up of interest payable on bank borrowings and unsecured loan notes of GBP0.6m, together with an effective interest charge of GBP0.2m on the equity element of the loan notes.
Loss before tax
The Group reported a loss before tax of GBP4.0m in 2016 (2015: GBP0.3m).
Tax
The tax credit for the year was GBP0.3m (2015: GBPnil), represented by a corporation tax charge of GBP0.2m which was offset by a deferred tax credit of GBP0.5m. The deferred tax credit primarily related to acquired intangible assets.
Statutory loss after tax
The reported loss after tax was GBP3.7m (2015: GBP0.3m).
Capital raise
On 26 July 2016, the Company completed the acquisition of the entire issued share capital of TCSL for an enterprise value of GBP73m, settled in cash.
The Acquisition was financed as follows:
-- A placing of 67,164,180 ordinary shares of 1p each ("Ordinary Shares") at a price of 67p per share raising GBP45m (before costs)
-- New bank facilities of GBP20m, comprising a revolving credit facility of GBP11m and a term loan of GBP9m
-- The issue of GBP10m unsecured loan notes to the BGF with an associated option to subscribe for 5,970,149 Ordinary Shares at a price of 67p per share. These loan notes and options are considered as linked and are treated as one financial instrument with loan and equity elements. The fair values of the loan and equity elements have been assessed to be GBP7.2m and GBP2.6m respectively at the year end.
Warrants
During the year, as a result of sourcing, running and corner stoning the capital raise and the Acquisition, the Company issued warrants to MXC Capital Limited ("MXC") to subscribe for 4,409,299 Ordinary Shares at a price of 67p per share. This brings the total number of warrants issued to MXC to 4,851,184, equating to 6% of the share capital of the
Company. The fair value of the warrants granted was assessed to be GBP0.3m and has been recognised in Other Reserves and offset against Share Premium.
Long Term Incentive Plan
A Long Term Incentive Plan ("LTIP") was implemented in July 2016 to incentivise certain directors and senior executives of the Group. The awards are structured as Employee Shareholder Shares in TCSL. Beneficiaries will share in a pool of up to 6% of the growth in value in the market capitalisation of the Company from the market capitalisation of the Company on the date of its re-admission to trading on AIM adjusted for further share issuance and capital returns if any.
At the reporting date, LTIP awards equal to 5.3% of the growth in value have been made.
Capital reorganisation
During the year the Company undertook a capital reorganisation to reduce the number of shares in issue. The capital reorganisation was effected by way of a consolidation, subdivision and reclassification of every 50 existing ordinary shares into one new ordinary share of 1p each and one deferred share of 49p each. The deferred shares were subsequently acquired by the Company and cancelled.
Cash flow
The Group absorbed GBP2.8m of cash during the year with the key components of the Group's cash flow being:
2016 2015
GBP'000 GBP'000
------------------------------------- -------- --------
Net cash from operating activities,
before exceptional expenses 3.2 (0.1)
Exceptional expenses (3.3) (0.2)
Acquisition of TCSL, net of cash
acquired (74.0) -
Net proceeds from issue of shares 43.8 5.0
Cash inflow from bank borrowings
and loan notes 29.5 0.3
Repayment of bank borrowings (0.9) -
Capital expenditure (0.4) -
Tax paid (0.4) -
Net interest paid (0.3) -
------------------------------------- -------- --------
Net (decrease)/increase in cash
in the year (2.8) 5.0
------------------------------------- -------- --------
Net debt
The Group ended the year with cash balances of GBP2.2m (2015: GBP5.0m). In addition, an amount of GBP2.0m was classified as restricted cash to satisfy a final payment, if any, in respect of the acquisition of TCSL.
Net debt at 31 December 2016 amounted to GBP24.4m (2015: net funds GBP5.0m) which comprised of the following:
-- GBP18.8m of term loan and revolving credit facilities -- GBP7.2m of the debt element of loan notes recognised as liabilities -- GBP2.6m of the equity element of the loan notes -- GBP2.2m of cash and cash equivalents -- GBP2.0m of cash held in escrow
Change in accounting policy for FY2017
The Company is reviewing the way it accounts for revenue from annual software licences in the light of the new reporting standard on revenue recognition, IFRS 15 'Revenue from Contracts with Customers'. Currently the Company recognises the licence fee element of software licence agreements in the month in which the agreement commences. It is likely that the Company will early adopt IFRS 15 for the year ending 31 December 2017 and expects that this will result in a change to its current accounting policy to one of recognising revenue from the licence fee element of software licence agreements evenly over the term of the agreement. Such a change in revenue recognition policy will impact revenue recognised but is not expected to affect invoicing, cash flow profile or net debt position.
Should the Company early adopt IFRS 15 it will apply the change using a modified retrospective approach in which the comparative results for 2016 will not be restated, instead the Company will recognise a cumulative adjustment to opening retained earnings at 1 January 2017 in relation to agreements which still required performance by the Company at that date. The early adoption of IFRS 15 demonstrates the Board's desire to align ourselves with best practice.
Kevin Goggin
Chief Financial Officer
Consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
----------------------------------- ----- -------- --------
Revenue 2 5,753 -
Cost of sales (377) -
-----------------------------------
Gross profit 5,376 -
Administrative expenses (8,609) (345)
Operating loss 3 (3,233) (345)
Finance income 26 -
Finance expense (787) -
Loss before income tax (3,994) (345)
Income tax 254 -
-----------------------------------
Loss for the year attributable
to the owners of the parent (3,740) (345)
Other comprehensive income
that may be reclassified
subsequently to profit or
loss:
Currency translation differences 61 -
on consolidation
-----------------------------------
Total comprehensive expense
for the year attributable
to the owners of the parent (3,679) (345)
-----------------------------------
Loss per share attributable
to owners of the parent during
the year (expressed in pence
per share):
- basic and diluted 4 (9.8) (67.1)
-----------------------------------
2016 2015
Non-GAAP measure: EBITDA GBP'000 GBP'000
----------------------------------- ----- -------- --------
Operating loss (3,233) (345)
Depreciation and amortisation 2,576 -
-----------------------------------
Operating loss before share-based
payments and exceptional
items (657) (345)
Share-based payments 38 -
Exceptional items 3,333 145
-----------------------------------
EBITDA(1) 2,714 (200)
-----------------------------------
(1) EBITDA is defined as operating profit or loss before exceptional items, depreciation, amortisation and share-based payments.
Consolidated Statement of Financial Position
as at 31 December 2016
2016 2015
Note GBP'000 GBP'000
----------------------------------- ===== ========= ========
ASSETS
Non-current assets
Property, plant and equipment 30 -
Intangible assets 5 81,135 -
Deferred tax assets 13 -
-----------------------------------
81,178 -
Current Assets
Trade and other receivables 2,880 24
Current tax assets 89 -
Restricted cash 2,000 -
Cash and cash equivalents 2,200 5,027
-----------------------------------
7,169 5,051
-----------------------------------
Total assets 88,347 5,051
-----------------------------------
LIABILITIES
Current Liabilities
Trade and other payables (4,324) (121)
Current tax liabilities (165) -
Financial liabilities 8 (1,730) -
-----------------------------------
(6,219) (121)
Non-current liabilities
Financial liabilities 8 (24,293) -
Deferred tax liabilities (9,948) -
-----------------------------------
Total liabilities (40,460) (121)
-----------------------------------
Net assets 47,887 4,930
-----------------------------------
EQUITY
Capital and reserves attributable
to owners of the parent
Ordinary shares 9 760 4,419
Share premium 50,775 3,655
Foreign exchange translation 61 -
reserve
Other reserves 3,446 444
Accumulated losses (7,155) (3,588)
-----------------------------------
Total equity 47,887 4,930
-----------------------------------
Consolidated statement of changes in equity
for the year ended 31 December 2016
Equity Share-based Foreign
element
Ordinary Share Other of payment Accumulated exchange Total
loan
shares premium reserve notes reserve losses reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ========= ======== ======== ======== ============ ============ ========= ========
Balance
at 1 January
2015 4,713 3,190 - - - (7,918) - (15)
Loss for
the year - - - - - (345) - (345)
Other - - - - - - - -
comprehensive
income
-------------------
Total
comprehensive
expense - - - - - (345) - (345)
Issue
of Ordinary
shares
(net of
expenses) 4,131 909 - - - - - 5,040
Restructuring
of share
capital (4,675) - - - - 4,675 - -
Recognition
of warrants - (444) 444 - - - - -
Conversion
of loan
notes 250 - - - - - - 250
Balance
at 31
December
2015 4,419 3,655 444 - - (3,588) - 4,930
--------------------
Balance
at 1 January
2016 4,419 3,655 444 - - (3,588) - 4,930
Loss for
the year - - - - - (3,740) - (3,740)
Other
comprehensive
income - - - - - - 61 61
--------------------
Total
comprehensive
(expense)/income - - - - - (3,740) 61 (3,679)
Issue
of Ordinary
shares
(net of
expenses) 672 43,129 - - - - - 43,801
Restructuring
of share
capital (4,331) 4,331 - - - - - -
Recognition
of warrants - (340) 340 - - - - -
Fair value
of equity
element
of loan
notes - - - 2,624 - 173 - 2,797
Share-based
payments - - - - 38 - - 38
-------------------- --------- -------- -------- -------- ------------ ------------ --------- --------
Balance
at 31
December
2016 760 50,775 784 2,624 38 (7,155) 61 47,887
-------------------- --------- -------- -------- -------- ------------ ------------ --------- --------
Consolidated cash flow statement
for the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
-------------------------------------- ===== ========= ========
Cash flows used in operating
activities
Cash generated/(used) by operations,
before exceptional expenses 6 3,230 (118)
Exceptional expenses (3,333) (145)
Cash used by operations, before
exceptional expenses (103) (263)
Net income tax paid (393) -
Net cash used in operating
activities (496) (263)
Investing activities
Acquisition of subsidiary, (73,988) -
net of cash acquired
Interest received 26 -
Purchases of property, plant (14) -
and equipment
Purchase and capitalisation (417) -
of intangible assets
Net cash used in investing (74,393) -
activities
Financing activities
Proceeds from issuance of
ordinary shares (net of expenses) 43,801 5,040
Interest paid (348) -
Proceeds from long-term borrowings 19,650 250
Repayments of long-term borrowings (900) -
Proceeds from loan notes 9,852 -
Net cash from financing activities 72,055 5,290 -------------------------------------- Net (decrease)/increase in cash and cash equivalents (2,834) 5,027 Cash and cash equivalents 5,027 - at beginning of the year Effect of exchange rate changes 7 - -------------------------------------- Cash and cash equivalents at end of the year 2,200 5,027 --------------------------------------
1. Basis of Preparation
The financial information presented in this announcement is extracted from, and is consistent with, the Group's audited financial statements for the year ended 31 December 2016.
The announcement for the year ended 31 December 2016 was approved by the Board of Directors on 18 April 2016. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2016 or 2015 but is derived from those accounts. Statutory accounts for 2016 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The Group's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
Going concern
These consolidated financial statements have been prepared on the going concern basis. The Group meets its day to day working capital requirements through its existing cash resources and borrowing facilities which are sufficient to meet currently maturing obligations as they fall due. The Directors have reviewed the Group's financial projections including sensitivities for at least the next 12 months and have, at the time of approving the financial statements, a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future and accordingly these financial statements are prepared on the going concern basis.
2. Segmental information
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. During the year ended 31 December 2016, the Group had one single operating segment, being the provision of software and services to corporates and accountancy firms.
Geographical disclosures
In presenting information on the basis of geography, revenue is based on the location of the customers. Non-current assets are based on the geographical location of those assets.
Revenues Non-current
assets
------------------ ------------------
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ======== ======== ======== ========
United Kingdom 4,990 - 73,848 -
Ireland 763 - 7,317 -
Total 5,753 - 81,165 -
-----------------
Products and
services
Revenues
------------------
2016 2015
GBP'000 GBP'000
Software 4,938 -
Professional 815 -
services
-----------------
Total 5,753 -
-----------------
3. Operating loss
This is stated after charging: 2016 2015
GBP'000 GBP'000
------------------------------------------- ========== ========
Depreciation 17 -
Amortisation 2,559 -
Exceptional items comprise: 2016 2015
GBP'000 GBP'000
------------------------------------------- ========== ========
Restructuring costs 169 -
Recapitalisation costs - 145
Acquisition related costs 3,164 -
3,333 145
Acquisition related costs represented professional
fees, broker fees and due diligence costs relating
to the acquisition of TCSL. Restructuring costs
were principally redundancy and termination costs
relating to the Acquisition.
4. Loss per share
Basic and diluted
Basic loss per share is calculated by dividing the loss attributable to owners of the parent by the weighted average number of Ordinary shares in issue during the year. As the Group is loss-making, any LTIP awards in issue are considered to be 'anti-dilutive'. As such, there is no separate calculation for diluted loss per share.
Reconciliations of the loss and weighted average number of shares used in the calculation are set out below:
2016 2015
======== ============ ======== ======== ============ ========
Weighted Weighted
average average
Loss Loss Loss Loss
for number per for number per
the the
year of shares share year of shares share
GBP'000 (thousands) (pence) GBP'000 (thousands) (pence)
------------------- -------- ------------ -------- -------- ------------ --------
Loss attributable
to owners of
the parent (3,740) 38,096 (9.82) (345) 514 (67.12)
-------------------- -------- ------------ -------- -------- ------------ --------
5. Intangible assets
Intellectual Capitalised
Customer property development
Goodwill contracts rights costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ========= ========== ============= ============ ========
Cost:
As at 1 January - - - - -
2016
Additions - - - 417 417
Acquisitions 24,927 43,475 14,875 - 83,277
Disposals - - - - -
---------------------------
As at 31 December
2016 24,927 43,475 14,875 417 83,694
---------------------------
Accumulated amortisation:
As at 1 January - - - - -
2016
Charge - 1,882 644 33 2,559
As at 31 December
2016 - 1,882 644 33 2,559
---------------------------
Net book value:
As at 1 January - - - - -
2016
--------------------------- --------- ---------- ------------- ------------ --------
As at 31 December
2016 24,927 41,593 14,231 384 81,135
--------------------------- --------- ---------- ------------- ------------ --------
6. Reconciliation of net loss to net cash used in operating activities
2016 2015
GBP'000 GBP'000
-------------------------------------- ======== ========
Loss before income tax (3,994) (345)
Adjustments for:
Depreciation and impairments 17 -
to property, plant and equipment
Amortisation and impairments 2,559 -
to intangible assets
Share-based payments 38 -
Finance costs - net 761 -
Operating cash flows before
movements in working capital (619) (345)
Increase in receivables (74) (24)
Increase in payables 590 106
Cash used by operations, after
exceptional expenses (103) (263)
Exceptional expenses 3,333 145
---------------------------------------
Cash generated/(used) by operations,
before exceptional expenses 3,230 (118)
---------------------------------------
7. Net (debt)/funds
2016 2015
GBP'000 GBP'000
-------------------------------------- ========= ========
Cash at bank and in hand 2,200 5,027
Restricted cash and cash equivalents 2,000 -
Bank loans and loan notes (26,023) -
Equity element of loan notes (2,624) -
Net (debt)/funds (24,447) 5,027
---------------------------------------
8. Financial liabilities
2016 2015
GBP'000 GBP'000
---------------------------- ======== ========
Due within one year
Bank loans 1,730 -
Financial liabilities due 1,730 -
within one year
----------------------------
Due after one year
Bank loans 17,055 -
Loan notes 7,238 -
Financial liabilities due 24,293 -
after one year
----------------------------
Total financial liabilities 26,023 -
----------------------------
The Company entered into a GBP10,000,000 unsecured fixed rate loan notes agreement with the BGF with a 6.5 year term from 26 July 2016. Repayment will be made in four equal instalments semi-annually from 30 June 2021. The Company also granted the BGF an option to subscribe for 5,970,149 Ordinary Shares at a price of 67p at any time before 26 July 2023. In accordance with IAS 32, the loan notes and warrants issued to the BGF are deemed to be linked and are treated as a single financial instrument and shown at fair value. The fair value of the loan element was calculated at GBP7,203,000 using a discounted cash flow model over the term of the instrument and an effective borrowing rate of 13%, deemed by the Directors to be an appropriate market rate, reflecting the 6% coupon interest payments and the capital repayment profile of the loan notes. The balance of GBP2,797,000 is deemed to be the fair value of the equity element and is credited to Other Reserves.
9. Share capital and share premium
The share capital of Tax Systems plc consists of 76,001,889 fully paid Ordinary shares with a nominal value of 1p per share. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote.
On 26 July 2016, the Company issued 67,164,180 New Ordinary Shares with a nominal value of 1p at 67p each raising GBP45,000,000, before costs, as part of its funding of the Acquisition.
At the same time the Company undertook a capital restructuring in order to reduce the number in shares in issue. The capital restructuring was effected by way of a consolidation, subdivision and reclassification of every 50 existing ordinary shares of 1p each into one new ordinary share of 1p each and one deferred share of 49p each. The deferred shares were then acquired by the Company and cancelled.
The movements in share capital in 2015 arose from share capital restructuring and recapitalisation undertaken as part of the process of the Company (formerly Eco City Vehicles plc) exiting administration and becoming an investing company under the AIM Rules.
10. Acquisition
On 26 July 2016, the Company completed the acquisition of the entire share capital of TCSL, a leading supplier of tax software and services to the large corporate sector and the accounting profession in the UK and Ireland for an enterprise value of GBP73,000,000 settled entirely in cash from the proceeds from the equity placing of new ordinary shares, banking borrowings and loan notes. The acquisition constituted a reverse takeover under the AIM Rules for Companies. The acquisition method of accounting has been used as the Company is the acquirer, the consideration was paid wholly in cash and the former shareholders of TCSL exited the business on acquisition and have no interest in the enlarged group.
The acquisition had the following effect on the Group's assets and liabilities:
Provisional
fair
value
2016
GBP'000
--------------------------------- ------------
Property, plant and equipment 33
Intangible assets 58,350
Cash 1,012
Trade and other receivables 2,782
Trade and other payables (3,447)
Corporation tax (269)
Deferred tax liabilities (10,388)
Total 48,073
-----------------------------------
Consideration 73,000
Provisional fair value
of net assets acquired (48,073)
Provisional goodwill recognised 24,927
-----------------------------------
Provisional consideration
satisfied by:
- Cash consideration 73,000
- Escrow payment 2,000
- Cash and cash equivalents
acquired (1,012)
Total net cash outflow
on acquisition 73,988
-----------------------------------
No adjustments for accounting policy alignments were required.
GBP58,350,000 of customer related and intellectual property rights intangible assets were capitalised as part of the acquisition of TCSL and will be amortised over ten years. A deferred tax liability of GBP10,386,000 on the capitalisation of the intangible assets has been created on acquisition.
The calculation of provisional fair values of consideration, assets and liabilities such as goodwill and intangible assets as well as the assessment of any impairment to fair values generally, involve estimations of likely future cash flows delivering from or accruing to those assets and liabilities.
Judgement is also involved in selecting appropriate discount rates for determining the present value of those future cash flows. Final fair values may differ materially from those provisional values stated.
11. Post balance sheet events
Post year end, on 4 April 2017, the Group announced the acquisition of OSMO Data Technology Limited ("OSMO") in return for the issue of 4,701,492 ordinary shares in the Company. At the previous day's mid closing price, this valued OSMO at GBP3,200,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGUWCCUPMGQR
(END) Dow Jones Newswires
April 19, 2017 02:00 ET (06:00 GMT)
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