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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 : 6604P
Tax Systems PLC
04 September 2017
Tax Systems plc
("Tax Systems", the "Group" or the "Company")
Interim results for the six months ended 30 June 2017
Tax Systems plc (AIM: TAX), a leading supplier of corporation tax software and services, is pleased to announce its unaudited interim results for the six months ended 30 June 2017. This is the first set of interim results since the acquisition of Tax Computer Systems Limited ("TCSL") on 26 July 2016 which means that comparable numbers for the 6 months to 30 June 2016 are not representative of the Group in its current form.
Highlights
-- Revenue
- Year-on-year comparable organic revenue growth(1) of 7% compared with none over the previous three years.
- Year-on-year new order growth of 34% from licences, licence upgrades and professional services
- 92% of revenue is recurring from software licences. 8% of revenue is from professional services
- Revenue for the six months of GBP7.0m - 36 new clients won - Change of accounting policy for revenue recognition following early adoption of IFRS 15 -- Retention - Customer retention rate of 96% -- Costs - 91% gross margin due to low cost of sales - Percentage of operating costs(2) covered by margin generated from recurring revenue is 197% -- Adjusted EBITDA(3) - Adjusted EBITDA for the period was GBP3.4m - Adjusted EBITDA margin of 49% -- Cash and debt - Cash(4) of GBP4.2m at 30 June 2017 (31 December 2016: GBP4.2m) - Conversion of Adjusted EBITDA to operating cash flow before exceptional items of 98% - GBP0.9m bank loans repaid during the period
- Net debt(4) of GBP23.6m at 30 June 2017 (31 December 2016: GBP24.4m). Excluding the element of loan notes deemed as equity, net debt at 30 June 2017 was GBP21.2m (31 December 2016: GBP21.8m)
Hot Features
Premium
-- Acquisitions
- Acquisition of Osmo Data Technology Limited ("OSMO") on 3 April 2017 for GBP3.2m in shares
- OSMO contributed GBP0.3m to revenue in the three months from date of acquisition
- OSMO technology now linked with AlphaTax, the Company's flagship product
(1) On a proforma basis, applying IFRS 15 to all periods and excluding results from OSMO.
(2) Operating costs are other administrative expenses before exceptional items.
(3) Adjusted EBITDA is defined as operating profit or loss before exceptional items, depreciation, amortisation and share-based payments.
(4) Cash at 31 December 2016 included GBP2m of cash held in a solicitor escrow account in connection with the acquisition of TCSL which has since been recovered in full. 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:
"The first half of the year has been a period of solid progress for the Group. Twelve months ago, when Tax Computer Systems Limited was acquired we embarked on an investment and transformation plan to fuel organic growth whilst controlling costs to generate high margins and pay down our debt. With these results, we are able to provide demonstrable evidence that our activities are generating the desired outcomes and this coupled with the market opportunity, leaves us excited about the Group's continuous growth prospects".
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
Tax Systems plc
Gavin Lyons, Chief Executive Tel: +44 (0)
Officer 1784 777700
Kevin Goggin, Chief Financial Tel: +44 (0)
Officer 1784 777747
MXC Capital Markets LLP (Financial Tel: +44 (0)20
Adviser) 7965 8149
Charlotte Stranner
Steven Zhang
finnCap Limited (Nominated Tel: +44 (0)20
Adviser and Broker) 7220 0500
Jonny Franklin-Adams / James
Thompson (Corporate Finance)
Tim Redfern / Richard Chambers
(Corporate Broking)
Alma PR Tel: +44 (0)20
8004 4217
Hilary Buchanan / Josh Royston
/ Susie Hudson
About Tax Systems
Tax Systems 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.
Find out more at www.taxsystems.com
Chairman's Statement
I am pleased to present this interim report covering the six months ended 30 June 2017 and subsequent events.
This is my first interim report as Non-Executive Chairman following the board changes announced in April 2017, when Gavin Lyons became CEO, having previously held the position of Executive Chairman and I moved from Non-Executive Director to my current role. At the same time we also welcomed Kevin Goggin to the board as CFO and Paul Gibson was appointed as a Non-Executive Director. I am pleased to report the new arrangements are working well.
Since the acquisition of TCSL in July 2016 much has been achieved. Gavin has recruited new senior managers in technology, sales & marketing and human resources positions and has successfully integrated them with the core of the team in place at the time of the acquisition.
Customers remain strongly attached to our core products with new customers being added and new services sold to existing customers.
We have begun an overhaul of the products to update both the look and usability and plan to continue releasing product updates at regular intervals. With the acquisition of OSMO on 3 April 2017, we have added to our technology base and are now better placed to continue to exploit the opportunities arising from the general move to digitalise the reporting of tax in the corporate world as well as the requirement for tax departments to improve efficiency and reduce operational risk.
All this has been achieved while keeping control of costs.
In summary we remain pleased with the progress since the acquisition of TCSL and look forward with confidence to the future.
Clive Carver
Non-Executive Chairman
Chief Executive Officer's Review
I am pleased to present my review covering the six months ended 30 June 2017 in which I provide a high-level summary on four main areas:
-- Investment and transformation for organic growth -- Goals and strategy -- The market -- Outlook
Investment and transformation for organic growth
It has been just over twelve months since the acquisition of TCSL and it was outlined at the time that investment would be required in culture, people, processes, systems and infrastructure to fuel organic growth.
There has been a tremendous amount of transformation tasks completed by the team including defining our culture and values, an organisational restructure, a cost reduction triage of unnecessarily expensive items, recruitment of over 25 people, implementation of Agile development methodologies, the re-architecture of core technology solutions, research and development of new solutions, the fit out and move to new headquarters, the acquisition of OSMO and defining key performance indicators.
We still have a number of programmes to be finalised so that we can maximise organic growth opportunities but I am pleased with the results and speed of execution to date, particularly the 34% Year-on-year growth in new orders, the development release of our first cloud product (Data Entry) and the acquisition of OSMO.
Our employees, customers and core intellectual property continue to be of the highest calibre and I would like to thank everyone for their contributions during a time of substantial change.
Goals and strategy
Tax Systems is a leading supplier of corporation tax software and services to large corporates and the accountancy profession in the UK and Ireland. Our goals are to grow organically in UK and Ireland and either build or acquire additional technology solutions that can service the demand of our existing and target customers.
The acquisition of OSMO (a leading provider of automated data extraction services that connects to 305 versions of accounting systems; cloud, on premise and enterprise) in April 2017 is a good example of how we can help with such demand. 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. Less than 3 months after the acquisition, OSMO is now linked with AlphaTax, the Company's flagship product.
Having finalised our 18-month technology roadmap we have requirements for further technology components that we will either build or acquire. The objective is to create a single integrated platform that drives organic growth in the UK and Irish territories - once that is a proven and scalable model we will look to expand into new territories and diversify our offering.
The business currently has GBP23.6m of net debt so it is critical that we continue to function effectively and get the right balance between developing the business but not overstretching it by having too much leverage.
The Market
The market demand for corporation tax compliance and complementary solutions is being fuelled by four main areas:
-- Finance and Tax departments are increasingly working closer together meaning that the maintenance, accuracy and consistency of data over the entire compliance life-cycle is critical;
-- Requirements for Tax departments to provide meaningful tax intelligence to the business so that effective decisions regarding tax risk can be made whilst always ensuring compliance with tax regulations and filing requirements;
-- Requirements for Tax departments to do 'more with less' therefore they are looking to ensure the end to end tax process is as efficient as possible whilst ensuring risk and audit is managed effectively; and
-- Last but not least is the Government's policy of 'Making Tax Digital' by 2020. 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 processes as it will place a substantial strain on resources to move from annual to quarterly reporting.
Outlook
The Group continues to focus on delivering an end to end solution for tax departments to drive efficiency through automation and leverage tax data whilst managing tax risk and audit control.
We believe we are continuing to build a solid business platform from which to grow, and we have made solid progress in the first half of the year in no small part thanks to the hard work and diligence of our people.
Since the period end the trading performance of the Company has continued to be strong and in line with expectations.
The Board remains confident in the ability of the business to deliver growth and I look forward to the remainder of 2017 and beyond.
Gavin Lyons
Chief Executive Officer
Financial Review
In the first half of 2017, the Group has seen the benefits of the continuing transformation programme put in place following the acquisition of TCSL in July 2016 with increased order intake and a reduction in the operating cost base.
The results for the six months to 30 June 2017 comprise the results for TCSL for the six months together with the results for OSMO for the three-month period from the date of acquisition. The results for the year ended 31 December 2016 comprise the results for TCSL for the five months from acquisition. The costs of Tax Systems plc are included throughout each period.
With effect from 1 January 2017, the Group has early adopted the new reporting standard on revenue recognition, IFRS 15 'Revenue from Contracts with Customers'. Previously, the licence fee element of software licence agreements was recognised in the month in which the agreement commenced. This is now accounted for evenly over the period of the licence term.
Results summary
H1 2017
GBP'000
----------------------------------- --------
Revenue 7.0
Cost of sales (0.6)
Other administrative expenses (3.0)
----------------------------------- --------
Adjusted EBITDA 3.4
Amortisation of development
costs and depreciation (0.1)
----------------------------------- --------
Adjusted operating profit 3.3
Exceptional items (transaction
and restructuring costs) (1.0)
Amortisation of other intangibles (3.0)
----------------------------------- --------
Operating loss (0.7)
Net finance charges (0.8)
----------------------------------- --------
Loss before tax (1.5)
----------------------------------- --------
Revenue and gross margin
Revenue for the period amounted to GBP7.0m from a mixture of software sales and services mostly to large blue-chip corporates and major accountancy firms. 89% of revenue is derived in the UK with the rest from Ireland.
Sales of software licences amounted to GBP6.5m of total revenue. This revenue stream provides the Group with a strong recurring revenue model with licence terms now ranging from 1 year to 5 years.
On a proforma basis, applying IFRS 15 to all periods and excluding the results from OSMO, year-on-year total revenue has increased by 7%.
Professional services revenue was GBP0.5m and due to the seasonality of tax filing deadlines this revenue is expected to increase in H2 2017.
Gross profit amounted to GBP6.4m after accounting for cost of sales which comprised directly attributable staff costs and third-party hosting costs. The corresponding gross margin is 91%.
Operating costs
Total operating costs for the six months to 30 June 2017 were GBP7.1m and comprised:
H1 2017 FY 2016
GBP'000 GBP'000
------------------------------- -------- --------
Other administrative expenses 3.0 2.7
Transaction costs 0.2 3.1
Restructuring costs 0.8 0.2
Amortisation and depreciation 3.1 2.6
------------------------------- -------- --------
Total operating costs 7.1 8.6
------------------------------- -------- --------
Other administrative expenses for H1 2017 include an amount of GBP0.3m in respect of the costs of OSMO from acquisition. The transaction and restructuring costs were principally the costs of the acquisitions together with redundancy and termination costs.
Amortisation and depreciation comprises GBP2.2m on customer contracts, GBP0.8m on intellectual property rights, GBP0.1m for capitalised development costs.
At 30 June 2017 the company employed 92 staff.
Operating loss and Adjusted EBITDA
The Directors use Adjusted EBITDA as a non-GAAP measure to assess the underlying performance. This is considered to be the most relevant measure of the performance of the Group. Adjusted EBITDA is defined as operating profit or loss before exceptional items, depreciation, amortisation and share-based payments.
Adjusted EBITDA for the six months amounted to GBP3.4m. A reconciliation of operating loss to Adjusted EBITDA is as follows:
H1 2017 FY 2016
GBP'000 GBP'000
------------------------------- -------- --------
Operating loss (0.7) (3.2)
Transaction and restructuring
costs 1.0 3.3
Amortisation and depreciation 3.1 2.6
------------------------------- -------- --------
Adjusted EBITDA 3.4 2.7
------------------------------- -------- --------
The operating loss for the period was GBP0.7m.
Net finance costs
Net finance costs for the period amounted to GBP0.8m, 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 for the six months to 30 June 2017 of GBP1.5m.
Tax
The tax credit for the period was GBP0.7m, which represented a corporation tax charge of GBP0.1m offset by a deferred tax credit of GBP0.8m. The deferred tax credit primarily related to acquired intangible assets.
Cash and net debt
The Group ended the period with GBP4.2m of cash at bank. During the period, the escrow arrangement for any potential payments on the acquisition of TCSL was settled resulting in the recovery of GBP2m by the Group. The Group generated GBP2.4m of cash from operating activities after exceptional items during the period.
Capital expenditure of GBP0.4m was incurred in the period, mostly in respect of the relocation of the UK operations. The Group capitalised GBP0.6m of development costs in the period reflecting the on-going development work for updating the core tax software products.
Net debt reduced from GBP24.4m at 31 December 2016 to GBP23.6m at 30 June 2017 and comprised the following:
-- GBP17.9m of term loan and revolving credit facilities -- GBP7.4m of the debt element of loan notes recognised as liabilities -- GBP2.5m of the equity element of the loan notes -- GBP4.2m of cash and cash equivalents
Kevin Goggin
Chief Financial Officer
Condensed Consolidated Statement of Comprehensive Income
Six Six Year
months months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
----------------------------------- ----- ------------ ------------ ------------
Revenue 4 7,016 - 5,753
Cost of sales (627) - (377)
----------------------------------- ----- ------------ ------------ ------------
Gross profit 6,389 - 5,376
Administrative expenses (7,081) (478) (8,609)
----------------------------------- ----- ------------ ------------ ------------
Operating loss 6 (692) (478) (3,233)
Finance income 7 4 - 26
Finance costs 7 (839) - (787)
----------------------------------- ----- ------------ ------------ ------------
Loss before income tax (1,527) (478) (3,994)
Income tax 8 737 - 254
----------------------------------- ----- ------------ ------------ ------------
Loss for the period/year
attributable to the owners
of the parent (790) (478) (3,740)
Other comprehensive income
that may be reclassified
subsequently to profit or
loss:
Currency translation differences
on consolidation 2 - 61
----------------------------------- ----- ------------ ------------ ------------ Total comprehensive expense for the period/year attributable to the owners of the parent (788) (478) (3,679) ----------------------------------- ----- ------------ ------------ ------------ Loss per share attributable to owners of the parent during the period/year (expressed in pence per share): - basic and diluted 9 (1.01) (5.41) (9.82) ----------------------------------- ----- ------------ ------------ ------------ Non-GAAP measure: Adjusted EBITDA ----------------------------------- ----- ------------ ------------ ------------ Operating loss 6 (692) (478) (3,233) Depreciation and amortisation 6 3,099 - 2,576 ----------------------------------- ----- ------------ ------------ ------------ Operating profit/(loss) before share-based payments and exceptional items 2,407 (478) (657) Share-based payments 37 - 38 Exceptional items 6 962 - 3,333 ----------------------------------- ----- ------------ ------------ ------------ Adjusted EBITDA(1) 3,406 (478) 2,714 ----------------------------------- ----- ------------ ------------ ------------
(1) Adjusted EBITDA is defined as operating profit or loss before exceptional items, depreciation, amortisation and share-based payments.
Condensed Consolidated Statement of Financial Position
As at As at As at
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
----------------------------------- ----- ------------ ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 405 - 30
Intangible assets 10 82,009 - 81,135
Deferred tax assets 14 - 13
----------------------------------- ----- ------------ ------------ ------------
82,428 - 81,178
----------------------------------- ----- ------------ ------------ ------------
Current assets
Trade and other receivables 3,544 65 2,880
Current tax assets 1,035 - 89
Restricted cash - - 2,000
Cash and cash equivalents 11 4,180 4,617 2,200
----------------------------------- ----- ------------ ------------ ------------
8,759 4,682 7,169
----------------------------------- ----- ------------ ------------ ------------
Total assets 91,187 4,682 88,347
----------------------------------- ----- ------------ ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables (9,604) (230) (4,324)
Current tax liabilities (14) - (165)
Financial liabilities 12 (1,730) - (1,730)
----------------------------------- ----- ------------ ------------ ------------
(11,348) (230) (6,219)
Non-current liabilities
Financial liabilities 12 (23,639) - (24,293)
Deferred tax liabilities (9,389) - (9,948)
----------------------------------- ----- ------------ ------------ ------------
Total liabilities (44,376) (230) (40,460)
----------------------------------- ----- ------------ ------------ ------------
Net assets 46,811 4,452 47,887
----------------------------------- ----- ------------ ------------ ------------
EQUITY
Capital and reserves attributable
to owners of the parent
Ordinary shares 13 807 4,419 760
Share premium 13 53,925 3,655 50,775
Foreign exchange reserve 63 - 61
Other reserves 3,283 444 3,446
Accumulated losses (11,267) (4,066) (7,155)
----------------------------------- ----- ------------ ------------ ------------
Total equity 46,811 4,452 47,887
----------------------------------- ----- ------------ ------------ ------------
Condensed Consolidated Statement of Changes in Equity
Equity Share-based
element Foreign
Ordinary Share Other of payment Accumulated exchange Total
loan
shares premium reserve notes reserve losses reserve equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Six months
to 30 June
2016
Balance at
1 January
2016 4,419 3,655 444 - - (3,588) - 4,930
Loss for the
six months - - - - - (478) - (478)
Other - - - - - - - -
comprehensive
income
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Total
comprehensive
expense - - - - - (478) - (478)
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Balance at
30 June 2016 4,419 3,655 444 - - (4,066) - 4,452
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Twelve months
to 31 December
2016
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) 13 672 43,129 - - - - - 43,801
Restructuring
of share capital 13 (4,331) 4,331 - - - - - -
Recognition
of warrants 13 - (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
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Six months
to 30 June
2017
Balance at
1 January
2017, as
originally
reported 760 50,775 784 2,624 38 (7,155) 61 47,887
Change in
accounting 2.1,
policy 5 - - - - - (3,522) - (3,522)
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Balance at 1
January 2017,
as restated 760 50,775 784 2,624 38 (10,677) 61 44,365
Loss for the
six months - - - - - (790) - (790)
Other
comprehensive
income - - - - - - 2 2
------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- -------- Total comprehensive (expense)/income - - - - - (790) 2 (788) Issue of Ordinary shares 13 47 3,150 - - - - - 3,197 Transfer for equity element of loan notes - - - (200) - 200 - - Share-based payments - - - - 37 - - 37 ------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- -------- Balance at 30 June 2017 807 53,925 784 2,424 75 (11,267) 63 46,811 ------------------- ----- --------- -------- -------- --------- ------------ ------------ ---------- --------
Condensed Consolidated Cash flow Statements
Six Six Year
months months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
---------------------------------- ----- ------------ ------------ ------------
Cash flows from/(used in)
operating activities
Cash generated/(used) by
operations, before exceptional
expenses 14 3,325 (410) 3,230
Exceptional expenses (920) - (3,333)
---------------------------------- ----- ------------ ------------ ------------
Cash generated/(used) by
operations after exceptional
items 2,405 (410) (103)
Net income tax paid (309) - (393)
---------------------------------- ----- ------------ ------------ ------------
Net cash from/(used in)
operating activities 2,096 (410) (496)
---------------------------------- ----- ------------ ------------ ------------
Investing activities
Acquisition of subsidiary,
net of cash acquired 16 2,384 - (73,988)
Interest received 4 - 26
Purchases of property, plant
and equipment (367) - (14)
Purchase and capitalisation
of intangible assets (576) - (417)
---------------------------------- ----- ------------ ------------ ------------
Net cash generated from/(used
in) investing activities 1,445 - (74,393)
---------------------------------- ----- ------------ ------------ ------------
Financing activities
Proceeds from issuance of
ordinary shares (net of
expenses) - - 43,801
Interest paid (661) - (348)
Proceeds from long-term
borrowings - - 19,650
Repayments of long-term
borrowings (900) - (900)
Proceeds from loan notes - - 9,852
---------------------------------- ----- ------------ ------------ ------------
Net cash (used in)/from
financing activities (1,561) - 72,055
---------------------------------- ----- ------------ ------------ ------------
Net increase/(decrease)
in cash and cash equivalents 1,980 (410) (2,834)
Cash and cash equivalents
at beginning of the period/year 2,200 5,027 5,027
Effect of exchange rate
changes - - 7
---------------------------------- ----- ------------ ------------ ------------
Cash and cash equivalents
at end of the period/year 4,180 4,617 2,200
---------------------------------- ----- ------------ ------------ ------------
1. General information
Tax Systems plc ('the Company') and its subsidiaries
(together 'the Group') are leading suppliers
of corporation tax and associated software and
services to large corporates and accountancy
firms in both the UK and Ireland. The Group
is headquartered in the UK and, during the six
months ended 30 June 2017, operated ventures
in the UK and Ireland.
The Company is a public limited company incorporated
and domiciled in England and Wales whose shares
are publicly traded on the AIM market of the
London Stock Exchange ('AIM'). The registered
number of the Company is 04998151 and the registered
address is Magna House, 18-32 London Road, Staines-upon-Thames
TW18 4BP.
The condensed consolidated interim financial
information was approved for issue by the Board
on 1 September 2017.
The 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 2016 were approved by the Board
on 18 April 2017 and delivered to the Registrar
of Companies. The Auditors' report on those
accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain
any statement under Section 498 of the Companies
Act 2006.
The condensed consolidated interim financial
information is neither audited nor reviewed
by the auditors and the results of the operations
for the six months ended 30 June 2017 are not
necessarily indicative of the operating results
for future operating periods.
2. Basis of preparation
The condensed consolidated interim financial
information in this report has been prepared
under the measurement principles of International
Financial Reporting Standards ('IFRS') as adopted
by the European Union ('IFRS as adopted by the
EU'), using accounting policies and methods
of computation consistent, except as noted below,
with those set out in the Company's 2016 Annual
Report and Accounts. The financial statements
have been prepared under the historical cost
convention, as modified, where applicable, by
the revaluation of financial assets and financial
liabilities (including derivatives) at fair
value through profit or loss. As permitted by
AIM rules, the Group has not applied IAS 34
'Interim reporting' in preparing this interim
report.
The principal accounting policies applied in
the preparation of these interim statements
are the same as those used in preparing the
consolidated financial statements of the Group
at 31 December 2016, except as stated below.
The Company has reviewed the way that it accounts
for revenue from software licences and has early
adopted the new reporting standard on revenue
recognition, IFRS 15 ' Revenue from Contracts
with Customers'. Previously the Company recognised
the licence fee element of software licence
agreements in the month in which the agreement
commenced. Under IFRS 15 this is now accounted
for evenly over the period of the licence term.
The Company has applied the change in accounting
policy by using a modified retrospective approach
in which the comparative results for 2016 have
not been restated, instead a cumulative adjustment
has been recognised through retained earnings
at 1 January 2017 in relation to agreements
which still required performance by the Company
at that date. Further details are set out in
note 5.
Based on projections prepared of the Group's
anticipated future results, the Directors have
reasonable expectations that the Group will
have adequate resources to continue in existence
for the foreseeable future. Therefore, the Directors
continue to adopt the going concern basis in
preparing this financial information.
There were no new or amended accounting standards
relevant to the Group that were effective for
the first time for the financial year beginning
1 January 2017 that have a material impact on
the Group's consolidated financial statements.
A number of new, revised and amended accounting
standards and interpretations are currently
endorsed but are effective for annual periods
beginning after 1 January 2017, and have not
been applied in preparing these consolidated
financial statements. None of these are expected
to have material impact on the consolidated
financial statements of the Group, except the
following:
Accounting standard Effective date (subject
to EU endorsement)
IFRS 9 Financial instruments 1 January 2018
IFRS 16 Leases 1 January 2019
The Group is currently assessing the impact
of the other standards listed above on its results,
financial position and cash flows.
The Group continues to monitor the potential
impact of other new standards and interpretations
which may be endorsed by the European Union
and require adoption by the Group in future
accounting periods.
3. Critical accounting estimates and judgements
The preparation of the financial statements
requires the Group to make estimates, judgements
and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses
and related disclosure of contingent assets
and liabilities. The Directors base their estimates
on historical experience and various other assumptions
that they believe are reasonable under the circumstances,
the results of which form the basis for making
judgements about the carrying value of assets
and liabilities that are not readily apparent
from other sources. Actual results may differ
from these estimates under different assumptions
or conditions.
In the process of applying the Group's accounting
policies, management has made a number of judgements
and estimations, of which the following are
deemed to have the most significant effect on
amounts recognised in the financial statements:
3.1. Revenue recognition
The Group enters into agreements with customers
where a software licence is bundled with services.
Revenue is recognised separately for each component
if it is considered to represent a separable
good or service and a fair value can be reliably
established. This consideration requires an
element of judgement.
Revenue for professional services is recognised
when the right to consideration is earned as
each project progresses. Provisions against
accrued income are made as and when management
becomes aware of objective evidence that the
amount of time worked will not be recoverable
in full.
3.2. Share-based payments
Judgement and estimation are required in determining
the fair value of shares at the date of award.
The fair value is estimated using valuation
techniques which take into account the award's
term, the risk-free interest rate and the expected
volatility of the market price of the Company's
shares. Judgement and estimation are also required
to assess the number of options expected to
vest.
3.3. Development costs
The Group has capitalised internally generated
intangible assets in accordance with IAS 38.
Management has assessed expected contribution
to be generated from these assets and deemed
that no adjustment is required to the carrying
value of the assets. The recoverable amount
of the assets has been determined based on value
in use calculations which require the use of
estimates and judgements. Management reviews
the assets for impairment on a regular basis.
3.4. Impairment of assets
IFRS requires management to undertake an annual
test for impairment of assets with indefinite
lives, including goodwill and, for assets with
finite lives, to test for impairment if events
or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Impairment testing is an area involving management
judgement, requiring assessment as to whether
the carrying value of assets can be supported
by the fair value less costs to sell or net
present value of future cash flows derived from
such assets using cash flow projections which
have been discounted at an appropriate rate.
In calculating the net present value of the
future cash flows, certain assumptions are required
to be made in respect of highly uncertain matters
including management's expectations of growth
and discount rates. Changing the assumptions
selected by management could significantly affect
the Group's impairment evaluation and, hence,
results. The Group's review includes the key
assumptions related to sensitivity in the cash
flow projections.
3.5. Deferred tax
Deferred tax assets and liabilities require
management judgement in determining the amounts
to be recognised. In particular, judgement is
used when assessing the extent to which deferred
tax assets should be recognised, with consideration
given to the timing and level of future taxable
income.
3.6. Fair value measurement of other financial
instruments
Key judgements and estimates have been made
to the fair value of the loan notes and associated
share warrants, to the Business Growth Fund
plc ("BGF") between equity and debt elements.
Key estimates include the effective rate of
interest inherent in the debt element of this
instrument and share price volatility associated
with the Company's share price used to determine
the equity element of this instrument.
3.7. Acquisition accounting and goodwill
Where the Group undertakes business combinations,
the cost of acquisition is allocated to identifiable
net assets and contingent liabilities acquired
and assumed by reference to their estimated
fair values at the time of acquisition. The
remaining amount is recorded as goodwill. The
valuation of identifiable net assets involves
an element of judgement related to projected
results. Fair values that are stated as provisional
are not finalised at the reporting date and
final fair values may be determined that are
materially different from the provisional values
stated.
Judgement was exercised on use of the acquisition
method of accounting in respect of the acquisition
of TCSL which constituted a reverse takeover
under the AIM Rules for Companies. Further details
are set out in note 16.
4. Segmental information
Reportable segments
Tax Systems' operating segments are reported
based on the information reviewed by the chief
operating decision maker for the purposes of
allocating resources and assessing performance.
The Board of Directors is the Group's chief
operating decision maker.
The Board of Directors considers revenue, cost
of sales, operating costs, exceptional costs
and Adjusted EBITDA of the Group as a whole
when assessing the performance of the business
and making decisions about the allocation of
resources. In addition, the Board reviews revenue
split by business unit, products and geographies
to assist with the allocation of resources.
During the current financial year the Group
had a single class of business 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.
Six Six Year
months months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
---------------- -------- -------- ------------
United Kingdom 6,213 - 4,990
Ireland 803 - 763
---------------- -------- -------- ------------
Total 7,016 - 5,753
---------------- -------- -------- ------------
Products and services
Six Six Year
months months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------- -------- -------- ------------
Software 6,463 - 4,938
Professional services 553 - 815
----------------------- -------- -------- ------------
Total 7,016 - 5,753
----------------------- -------- -------- ------------
5. Change in accounting policy
The impact of the change in accounting policy as a result of the early adoption of IFRS 15 'Revenue from Contracts with Customers' if the Company had restated the financial position at 31 December 2016 would have been as follows:
As previously Accounting Pro-forma
reported adjustments net assets
GBP'000 GBP'000 GBP'000
------------------------------------- -------------- ------------ ------------
Non-current assets 81,178 - 81,178
Trade and other receivables 2,880 412 3,292
Corporation tax 89 831 920
Cash and restricted cash 4,200 - 4,200
Trade and other payables (6,219) (4,765) (10,984)
Non-current financial liabilities (24,293) - (24,293)
Deferred tax liabilities (9,948) - (9,948)
------------------------------------- -------------- ------------ ------------
Net assets 47,887 (3,522) 44,365
------------------------------------- -------------- ------------ ------------
If the acquisition of Tax Computer Systems
Limited ("TCSL") had occurred on 1 January
2016 and IFRS 15 had been applied at that
time, the revenue for TCSL would have been
as follows:
Six Six Year
months months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------------------- -------------- ------------ ------------
Proforma revenue 6,670 6,249 12,889
------------------------------------- -------------- ------------ ------------
6. Operating loss
This is stated after charging:
Six months Six Year
months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
----------------------------- ----- ----------- -------- ------------
Depreciation 18 - 17
Amortisation 10 3,081 - 2,559
----------------------------- ----- ----------- -------- ------------
Included within the operating loss is an amount
in respect of research and development of
GBP237,000 (2016: GBP393,000).
Exceptional items comprise:
Six months Six Year
months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------- ----- ----------- -------- ------------
Restructuring costs 773 - 169
Acquisition related
costs 189 - 3,164
----------------------------- ----- ----------- -------- ------------
962 - 3,333
----------------------------- ----- ----------- -------- ------------
Acquisition related costs for the period ended
30 June 2017 represented costs relating to
the acquisition of Osmo Data Technology Limited
and final settlement of the escrow arrangement
in respect of the prior period acquisition
of TCSL. Acquisition related costs for the
year ended 31 December 2016 represented professional
fees, broker fees and due diligence costs
relating to the acquisition of TCSL. Restructuring
costs in 2016 were principally redundancy
and termination costs relating to the acquisition
of TCSL.
7. Finance income and expenses
Six months Six Year
months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 ` GBP'000
-------------------------------- ----------- -------- ------------
Finance income
Interest income on short-term
deposits 4 - 19
Net foreign exchange
gains on financing activities - - 7
--------------------------------- ----------- -------- ------------
4 - 26
-------------------------------- ----------- -------- ------------
Finance costs
Interest payable on
bank borrowings and
loan notes (592) - (569)
Effective interest on
equity element of loan
notes (200) - (173)
Amortisation of debt
arrangement fees (47) - (45)
--------------------------------- ----------- -------- ------------
(839) - (787)
-------------------------------- ----------- -------- ------------
Net finance costs (835) - (761)
--------------------------------- ----------- -------- ------------
8. Income tax
Six months Six Year
months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------- ----------- -------- ------------
Current tax (124) - (199)
Deferred tax 861 - 453
------------------------------ ----------- -------- ------------
Total tax credit in the
Statement of Comprehensive
Income 737 - 254
------------------------------ ----------- -------- ------------
9. 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 period.
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.
Details of the loss and weighted average number of shares used in the calculation
are set out below:
Six months Six Year
months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------- ----------- -------- ------------
Loss attributable to
owners of the parent (790) (478) (3,740)
Weighted average number
of shares (thousands) 78,288 8,838 38,096
Loss per share (pence) (1.01) (5.41) (9.82)
-------------------------- ----------- -------- ------------
10. Intangible assets
Intellectual Capitalised
Customer property development
Goodwill contracts rights costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ---------- ------------- ------------ --------
Six months to 30 June
2016
Net book value - - - - -
As at 1 January 2016 - - - - -
-------------------------- --------- ---------- ------------- ------------ --------
As at 30 June 2016 - - - - -
-------------------------- --------- ---------- ------------- ------------ --------
Twelve months to 31
December 2016
Cost
As at 1 January 2016 - - - - -
Additions - - - 417 417
Acquisitions 24,927 43,475 14,875 - 83,277
-------------------------- --------- ---------- ------------- ------------ --------
As at 31 December 2016 24,927 43,475 14,875 417 83,694
-------------------------- --------- ---------- ------------- ------------ --------
Accumulated amortisation
and impairment
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
-------------------------- --------- ---------- ------------- ------------ --------
Six months to 30 June
2017
Cost
As at 1 January 2017 24,927 43,475 14,875 417 83,694
Additions - - - 576 576
Acquisitions 1,788 645 946 - 3,379
-------------------------- --------- ---------- ------------- ------------ --------
As at 30 June 2017 26,715 44,120 15,821 993 87,649
-------------------------- --------- ---------- ------------- ------------ --------
Accumulated amortisation
As at 1 January 2017 - 1,882 644 33 2,559
Charge - 2,190 767 124 3,081
-------------------------- --------- ---------- ------------- ------------ --------
As at 30 June 2017 - 4,072 1,411 157 5,640
-------------------------- --------- ---------- ------------- ------------ --------
Net book value
As at 1 January 2017 24,927 41,593 14,231 384 81,135
-------------------------- --------- ---------- ------------- ------------ --------
As at 30 June 2017 26,715 40,048 14,410 836 82,009
-------------------------- --------- ---------- ------------- ------------ --------
11. Net (debt)/funds
30 30 June 31 December
June
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
--------------------------------------- ------- --------- -------- ------------
Cash at bank and in hand 4,180 4,617 2,200
Restricted cash - - 2,000
Bank loans and loan notes 12 (25,369) - (26,023)
Equity element of loan
notes (2,424) - (2,624)
--------------------------------------- ------- --------- -------- ------------
Net (debt)/funds (23,613) 4,617 (24,447)
--------------------------------------- ------- --------- -------- ------------
The restricted funds related to an escrow
held for the satisfaction of any potential
payments in respect of the acquisition of
TCSL. This has now been transferred to cash
at bank as the position has been settled.
12. Financial liabilities
30 30 June 31 December
June
2017 2016 2016
GBP'000 GBP'000 GBP'000
---------------------------------------------------- -------- -------- ------------
Due within one year
Bank loans 1,730 - 1,730
----------------------------------------------------- -------- -------- ------------
Financial liabilities
due within one year 1,730 - 1,730
----------------------------------------------------- -------- -------- ------------
Due after one year
Bank loans 16,190 - 17,055
Loan notes 7,449 - 7,238
----------------------------------------------------- -------- -------- ------------
Financial liabilities
due after one year 23,639 - 24,293
----------------------------------------------------- -------- -------- ------------
Total financial liabilities 25,369 - 26,023
----------------------------------------------------- -------- -------- ------------
The Group has revolving and term loan facilities,
which are available until 30 June 2021. The
term loan is amortised evenly over the five
year term.
The Company has a GBP10,000,000 unsecured fixed
rate loan notes agreement with the Business
Growth Fund ("BGF"). 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 effective
interest charge on the loan notes has been
transferred from Other Reserves to Retained
Earnings in the Consolidated Statement of Changes
in Equity.
13. Ordinary shares, share premium and other reserves
Allotted and fully paid GBP0.01 nominal value shares
Number Ordinary Share
of shares shares premium
'000 GBP'000 GBP'000
------------------------ ---------- ---------- --------- --------
As at 1 January 2016 441,885 4,419 3,655
Issue of new shares 67,164 672 44,328
Restructuring of share
capital (433,048) (4,331) 4,331
Issue of warrants - - (340)
Cost of share issue - - (1,199)
------------------------ ---------- ---------- --------- --------
As at 1 January 2017 76,001 760 50,775
Issue of new shares 4,701 47 3,150
------------------------ ---------- ---------- --------- --------
As at 30 June 2017 80,702 807 53,925
------------------------ ---------- ---------- --------- --------
As at 1 January 2016 441,885 4,419 3,655
Issue of new shares - - -
------------------------ ---------- ---------- --------- --------
As at 30 June 2016 441,885 4,419 3,655
------------------------ ---------- ---------- --------- --------
Reconciliation of shares issued
Number Ordinary Share
of
shares shares premium Total
'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- ---------- --------- --------
As at 1 January 2016 441,885 4,419 3,655 8,074
Restructuring of share
capital (433,048) (4,331) 4,331 -
Issue of warrants - - (340) (340)
Issue of shares 67,164 672 43,129 43,801
------------------------ ---------- ---------- --------- --------
As at 1 January 2017 76,001 760 50,775 51,535
Share issue 4,701 47 3,150 3,197
------------------------ ---------- ---------- --------- --------
As at 30 June 2017 80,702 807 53,925 54,732
------------------------ ---------- ---------- --------- --------
Share capital and share premium
At 30 June 2017 the share capital of Tax Systems
plc consisted of 80,703,381 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
of TCSL.
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.
On 3 April 2017 the Company issued 4,701,492
Ordinary shares as consideration for the acquisition
of the entire share capital of OSMO.
14. Reconciliation of net loss to net cash used in operating activities
Six months Six Year
months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- -------- ------------
Loss before income tax (1,527) (478) (3,994)
Adjustments for: - - -
Depreciation and impairments
to property, plant and equipment 18 - 17
Amortisation and impairments
to intangible assets 3,081 - 2,559
Share-based payments 37 - 38
Finance costs - net 835 - 761
------------------------------------ ----------- -------- ------------
Operating cash flows before
movements in working capital 2,444 (478) (619)
Increase in receivables (103) (41) (74)
Increase in payables 22 109 590
------------------------------------ ----------- -------- ------------
Cash generated/(used) by
operations, after exceptional
expenses 2,363 (410) (103)
Exceptional expenses 962 - 3,333
------------------------------------ ----------- -------- ------------
Cash generated/(used) by
operations, before exceptional
expenses 3,325 (410) 3,230
------------------------------------ ----------- -------- ------------
15. Commitments, contingencies and guarantees
Legal contingencies
No member of the Group is or has been involved in any governmental, legal or arbitration proceedings and the Directors are not aware of any such proceedings pending or threatened by or against the Group during the 12 months preceding the date of these financial statements which may have or have had, in the recent past, a significant effect on the financial position or profitability of the Group.
Guarantees
There are a number of operational and financial guarantees given by the Company and certain subsidiary companies in each case on behalf of other subsidiary entities.
16. Acquisitions
Tax Computer Systems Limited
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 Provisional
value
fair adjustments fair
value value
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ ------------
Property, plant and equipment 33 - 33
Intangible assets 58,350 - 58,350
Cash 1,012 - 1,012
Trade and other receivables 2,782 - 2,782
Trade and other payables (3,447) (87) (3,534)
Corporation tax (269) - (269)
Deferred tax liabilities (10,388) - (10,388)
---------------------------------- ------------ ------------ ------------
Total 48,073 (87) 47,986
---------------------------------- ------------ ------------ ------------
Consideration 73,000 - 73,000
Provisional fair value
of net assets acquired (48,073) 87 (47,986)
---------------------------------- ------------ ------------ ------------
Provisional goodwill recognised 24,927 87 25,014
---------------------------------- ------------ ------------ ------------
Provisional consideration
satisfied by:
- Cash consideration 73,000 - 73,000
- Escrow payment 2,000 (1,913) 87
- Cash and cash equivalents
acquired (1,012) - (1,012)
---------------------------------- ------------ ------------ ------------
Total net cash outflow
on acquisition 73,988 (1,913) 72,075
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 are
being amortised over ten years. A deferred
tax liability of GBP10,386,000 on the capitalisation
of the intangible assets was 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.
Osmo Data Technology Limited
On 3 April 2017, the Company completed the acquisition of the entire share capital of Osmo Data Technology Limited ("OSMO"), a supplier of software solutions to the financial services industry in return for the issue of 4,701,492 ordinary shares in the Company, which valued OSMO at GBP3,197,000.
OSMO contributed revenue of GBP346,000 and a loss after tax of GBP45,000 to the Group for the period from acquisition to 30 June 2017.
The Group made this acquisition in order to gain automation technology to extract data from accounting packages into its core tax technologies.
One-off costs relating to the acquisition of GBP189,000 have been recognised in the Consolidated Statement of Comprehensive Income within 'Exceptional items'.
The Directors made an initial provisional assessment of the fair values of the assets and liabilities at 3 April 2017.
The acquisition had the following effect on the Group's assets and liabilities:
Provisional
fair
value
GBP'000
---------------------------------------------- --------------
Property, plant and equipment 26
Intangible assets 1,591
Cash 471
Trade and other receivables 149
Trade and other payables (523)
Corporation tax 84
Deferred tax liabilities (302)
------------------------------------------------- --------------
Total 1,496
------------------------------------------------- --------------
Consideration 3,197
Fair value of net assets acquired (1,496)
------------------------------------------------- --------------
Goodwill recognised 1,701
------------------------------------------------- --------------
Provisional consideration
satisfied by:
- Issuance of shares 3,197
- Cash and cash equivalents
acquired (471)
------------------------------------------------- --------------
2,726
No adjustments for accounting policy alignments
were required.
The intangible assets capitalised as part
of the acquisition of OSMO can be analysed
as follows:
GBP'000
---------------------------------------------- ------------
Customer relationships - amortised
over ten years 645
Technology related intangibles
- amortised over ten years 946
------------------------------------------------- ------------
1,591
---------------------------------------------- ------------
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.
17. Post balance sheet events
On 2 August 2017, the Company made awards to certain directors and members of the senior management team under the Company's recently established long term incentive plan ("LTIP") and entered into a deed of amendment and restatement in relation to the MXC Capital Limited warrant instrument. These awards follow the changes in board composition and the recruitment of a senior management team as previously announced and result in no additional dilution to shareholders from the original arrangements as set out in the admission document dated 1 July 2016 ("Admission Document") which was sent to shareholders in connection with the Company's acquisition of TCSL.
Awards under the LTIP are structured as a combination of EMI options with an exercise price of 81.5 pence per ordinary share of 1 penny each in the capital of the Company ("Ordinary Share"), being the mid closing price of an Ordinary Share as at 1 August 2017, and growth shares exercisable at nil cost. The commercial terms are the same as those awards made under the original Employee Share Scheme as disclosed in the Admission Document.
Awards of 4.7 per cent. of shareholder value created have been made to Gavin Lyons, Chief Executive Officer, (3.2 per cent.), Paul Gibson, Non-Executive Director (1.0 per cent.) and Kevin Goggin, Chief Financial Officer, (0.5 per cent.) (the "Director LTIP Awards"). Further awards of 3.3 per cent. of shareholder value created have been made to certain members of the senior management team. In order to satisfy personal taxes which will be incurred as a result of their participation in the LTIP, Tax Computer Systems Limited, a subsidiary of the Company, has made loans to certain beneficiaries of the LTIP (the "Loans"). The Loans, together with the taxes and fees payable by the Company in relation to the LTIP, will result in a cash outflow of approximately GBP300,000.
The Company also entered into a deed of amendment and restatement whereby MXC Capital Limited ("MXC") has agreed to reduce its evergreen warrants over 6 per cent. of the fully diluted share capital of the Company to 4 per cent. in order that the awards under the LTIP be increased from 6 per cent. to 8 per cent. of shareholder value created. Therefore 1,488,543 warrants have been cancelled and MXC now hold 3,362,641 warrants (the "Warrants"), representing 4 per cent. of the issued share capital, as enlarged by the Warrants. MXC also hold 15,200,718 Ordinary Shares, representing 18.8 per cent. of the Company's issued share capital.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UOAORBWAKRAR
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September 04, 2017 02:00 ET (06:00 GMT)
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