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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Blancco Technology Group Plc | LSE:BLTG | London | Ordinary Share | GB00B06GNN57 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 225.00 | 222.00 | 228.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2022 to Apr 2024
TIDMBLTG
RNS Number : 9106A
Blancco Technology Group PLC
28 September 2022
28 September 2022
Blancco Technology Group plc
Final results for the year ended 30 June 2022
Continued growth & strategic progress supported by ever-increasing structural tailwinds of Sustainability & Governance incl. new legislative proposals
Blancco Technology Group plc (AIM: BLTG, "Blancco", the "Company" or the "Group"), the industry standard in data erasure and mobile lifecycle solutions, is pleased to announce its final results for the year ended 30 June 2022 (the "Period") .
FINANCIAL HIGHLIGHTS
Hot Features
Premium
GBPm unless otherwise stated FY22 FY21 Change
Revenue 39.8 36.5 +9%
------ ------ -------
Gross profit 38.5 33.7 +14%
------ ------ -------
Adjusted EBITDA* 11.5 10.2 +13%
------ ------ -------
Adjusted operating profit* 6.5 5.3 +23%
------ ------ -------
Operating profit 1.9 1.8 +6%
------ ------ -------
Profit before tax 1.7 1.5 +14%
------ ------ -------
Adjusted operating cash flow** 10.8 10.8
------ ------ -------
Cash generated from continuing
operations 9.9 10.3 -3%
------ ------ -------
Diluted earnings per share 2.64p 2.21p +19%
------ ------ -------
Net funds 6.2 10.1
------ ------ -------
-- Robust organic revenue growth of 8%, 11% when adjusted for constant exchange rates ("CER"). Revenue increased by 9% (CER +12%) when revenue of GBP0.5 million from the recently acquired WipeDrive Inc ("WipeDrive") business is included:
-- IT Asset Disposition ("ITAD") revenue increased organically by 19% (CER +23%) to GBP13.7 million (FY 2021: GBP11.5 million). Inclusive of the acquired WipeDrive business, revenues rose to GBP13.8 million.
-- Enterprise revenue increased organically by 6% (CER +7%) to GBP15.0 million (FY 2021: GBP14.1 million). Inclusive of the acquired WipeDrive business, revenues rose to GBP15.4 million.
-- Mobile revenue fell slightly by 2% (CER +2%) to GBP10.6 million (FY 2021: GBP10.9 million) as ongoing component shortages and supply chain issues slowed the market for new smartphones, particularly in APAC.
-- Organic constant currency growth in each of our three geographies:
-- North America revenue increased by 8% (CER +7%) to GBP12.1 million (FY 2021: GBP11.2 million)
-- EMEA revenue increased by 16% (CER +20%) to GBP15.6 million (FY 2021: GBP13.4 million)
-- APAC revenue fell slightly by 2% (CER +4%) to GBP11.6 million (FY 2021: GBP11.9 million), reflecting the slower sales recovery in Mobile
-- Net funds balance of GBP6.2 million (30 June 2021: GBP10.1 million), despite a GBP7.2 million outflow relating to the immediately earnings enhancing acquisition of WipeDrive announced on 8 June 2022
-- Gross margins increased to 97% (FY 2021: 92%) driven by internal product development which has decreased our requirement for a significant number of third-party licences
-- Adjusted operating margin of 16% (FY 2021: 14%), led to an increase in Adjusted Operating Profit to GBP6.5 million (FY2021: GBP5.2 million). Operating Profit grew to GBP1.9 million (FY 2021: GBP1.8 million)
-- Adjusted EBITDA increased to GBP11.5 million (FY 2021: GBP10.2 million). EBITDA grew to GBP6.9 million (FY 2021: GBP6.7 million)
OPERATIONAL HIGHLIGHTS
-- Acquisition of US-based erasure specialist WipeDrive completed in June 2022 for initial consideration of US$8.5 million with up to US$1.5 million contingent consideration to be paid twelve months following the acquisition dependent on achieving certain customer retention targets
-- Sales strategy evolved further with revenue generated from channel partners continuing to grow strongly with channel revenue growing by 23% to GBP8.0 million (FY 2021: GBP6.5 million) and now representing 52% (FY 2021: 45%) of Enterprise revenue
-- High customer retention levels of 100% (FY 2021: 98.4%) of largest clients (GBP100k+) in the Period
-- Increasing sustainability and governance pressures on companies continue to drive growth in both Enterprise and ITAD revenues, particularly benefitting from the Group's strategic acquisitions, product suite innovation and 'go to market' strategy
-- Carbon neutrality status achieved for the 2021 calendar year
CURRENT TRADING AND OUTLOOK
-- Pipeline and Q1 sales activity provide confidence for continued growth in FY23, in line with the Board's expectations
-- Investment and innovation in our product suite continuing to deliver strategic benefits
-- Management of the sales team strengthened with recent appointments of a new President of Global Sales and a Vice President of Americas Sales, implementing new initiatives around channel and pricing in FY23
-- New regulations emerging from the EU through the Circular Economy Action Plan ("CEAP"), designed to extend the life of IT assets, to be implemented in 2023, are positive for Blancco and further support our growth expectations
-- WipeDrive team fully integrated and work underway on combined "best of breed" product to be released towards the end of the 2022 calendar year
Matt Jones, Chief Executive of Blancco, said:
"We're pleased with a further year of robust growth in revenue and profit, and ongoing strong cash generation from operations at Blancco. We believe we are well positioned to accelerate our progress into future years, particularly as a result of the recent strategic progress within the Group.
"Our acquisition of WipeDrive in June 2022 has further strengthened our technology and market position, particularly given its blue-chip customer base and Government contracts in the US. We are also at the early stage of seeing a range of regulations being implemented, primarily in the EU, which will drive companies to extend the life of IT assets and reduce waste. These initiatives play very well to Blancco's product set and our reputation as a market leader for sustainable asset disposal solutions.
"Furthermore, I am delighted with the senior hires we have made into our sales organisation and we are starting the new financial year with experienced, highly successful salespeople heading both our International (APAC & EMEA) & Americas sales teams. All of these developments give me great confidence that the strong growth we have experienced in the last financial year will continue."
*Adjusted profit measures are stated after excluding expenses relating to share option schemes, exceptional costs & incomes and the amortisation of acquired intangible assets
** Adjusted operating cash flow is operating cash flow excluding taxation, payments relating to share option schemes, interest payments & receipts and exceptional payments
Presentation and webcast:
A virtual results briefing for analysts will be held today, 28 September 2022 at 09.30am BST, via a live webcast and conference call facility.
If you would like to join the webcast or conference call, please contact Buchanan at blancco@buchanan.uk.com
SFor further information:
Blancco Technology Group plc Via Buchanan
Matt Jones, Chief Executive Officer
Adam Moloney, Chief Financial Officer
Peel Hunt (Nominated Advisor & Joint Broker)
+44 (0) 20 7418
Paul Gillam / James Smith 8900
+44 (0) 20 7597
Investec Bank plc (Joint Broker) 5970
Patrick Robb / Nick Prowting
+44 (0) 20 7466
Buchanan Communications Limited 5000
Chris Lane / Stephanie Whitmore / Jack Devoy
blancco@buchanan.uk.com
About Blancco
Blancco Technology Group plc is a leading global provider of mobile lifecycle solutions and secure data erasure solutions. For more information, please visit www.blancco.com .
CHIEF EXECUTIVE'S REPORT
Business overview
Against a backdrop of macro-economic challenges over recent years arising from Brexit, a pandemic and now very high levels of inflation in all of the major economies, Blancco has been consistent in delivering year-on-year increases in revenue and profitability and maintaining strong underlying cash generation. The most recent year ended 30 June 2022 is further evidence of this trend. The Group's financial and operational progress is supported by Environmental, Social and Governance ("ESG") initiatives that are driving changes in behaviours from all organisations and data privacy concerns that are affecting decision making at a Board level across the globe. Measures taken by the management team in the last year, particularly in relation to the Group's 'go to market' strategy, product suite innovation and the recent acquisition of WipeDrive, position Blancco strongly to take further advantage of these strong and enduring trends.
Enterprise
We continue to believe that the greatest growth opportunity for the Company lies within the Enterprise market. We have stated for several years that channel partners would represent an increasingly large proportion of Enterprise revenues. Channel partners are a key part of Blancco's growth strategy as they provide access to large blue-chip organisations that would typically be more difficult for a company of Blancco's size to sell to. In FY18, the period when we set out Blancco's growth strategy, Enterprise was the smallest of the three markets that Blancco served, with revenue of GBP8.6 million representing 32% of overall group revenue. In FY22, Enterprise has become the largest of our three markets, generating revenue of GBP15.4m (38% of total FY22 revenue), representing growth of GBP1.3 million versus FY21. The acquisition of WipeDrive will further enhance our reach in the market, with the business already contributing GBP0.4 million to FY22 revenues. In FY18, channel revenue in Enterprise was GBP3.6 million, representing 38% of Enterprise revenues. In FY22, Enterprise revenue from channel partners grew to GBP8.0 million, being 52% of Enterprise revenues. We remain committed to a channel first approach in Enterprise and anticipate this proportion of revenues continuing to increase over the coming years.
The largest companies in the world are most affected by regulation around sustainability and data protection. It has never been acceptable for sensitive data held by companies to be compromised and this is now accompanied by significant financial penalties arising from the various data protection regulations that are in place around the world. For example, it was reported by DLA Piper that the total value of fines under the EU General Data Protection Regulation ("GDPR") in 2021 was US$1.23 billion (2020: US$0.179 billion), including a record fine imposed on Amazon of US$887 million. One option to deal with this issue has been for companies to destroy any assets holding data by shredding, incineration or similar destruction methods and indeed the vast majority of assets used by organisations globally continue to be managed in this way. The new raft of incoming sustainability regulations will lead to the physical destruction of assets becoming increasingly less acceptable and assets will need to be more durable without compromising data security. Data erasure is the most secure way of achieving that aim for electronically held data.
This growing opportunity has been recognised by the Company and the expanded sales team described below will be increasingly focussed on the Enterprise opportunity and in particular extending the network of channel partners who will be able to assist Blancco in accelerating its growth in future years
IT Asset Disposition ("ITAD")
Blancco's ITAD customers operate as experts in the disposal of end-of-life IT assets, primarily for companies which are smaller than those which purchase licences directly from Blancco in the Enterprise market. These customers saw a period of very strong growth in FY22 as companies physically reopened offices following the pandemic. There was a backlog of equipment which reached the end of its life during the pandemic but that couldn't be disposed of until teams had returned to their offices. We also saw a reconfiguration of office space which is accelerating the move to flexible working and the increasing obsolescence of the desktop PC and monitor set up which doesn't lend itself well to flexible working.
Blancco's core ITAD revenue grew by 19% (23% adjusting for currency movements) to GBP13.7 million (FY 2021: GBP11.5 million) during the year, with WipeDrive adding a further GBP0.1 million of sales since acquisition in June 2022. Whilst growth is expected to slow modestly in the coming year as backlogs are cleared, this will be offset by the trend for smaller companies as well as larger ones to adopt more sustainable IT asset lifecycles.
Mobile
The second quarter of the 2022 calendar year was the fourth successive quarter that had seen a reduction in new smartphone sales according to the IDC. This is believed to be due to issues relating to the pandemic which delayed product launches and saw disruption in component availability and supply chain issues. Any slowing of the market for new handsets leads to fewer phones being traded in to offset the new handset cost. This reduces the volumes of handsets being processed by Blancco customers with many reporting a 10%+ reduction in volumes processed in comparison to the previous financial year. As a result, revenue in Mobile fell by 2% to GBP10.6 million (FY 2021: GBP10.9 million) although this was a 2% increase when movements in currency are adjusted for.
Approximately 50% of Blancco's sales in the APAC region are derived from Mobile, and therefore the slower recovery in Mobile has affected this region in particular.
Looking forward, there are a number of trends that are expected to support further growth:
-- Incoming EU regulation has a range of initiatives designed to lengthen the life of mobile phones and tablets which will fuel growth in the secondary market
-- Macro-economic conditions and the increasing cost of new smartphones is likely to prompt increasing numbers of consumers to purchase phones in the secondary market
We therefore continue to have confidence that the Mobile market will prove to be a good growth market over the medium term.
Acquisition of WipeDrive
We announced on 8 June 2022 that Blancco had completed the acquisition of WipeDrive Inc for an initial consideration of US$8.5 million and further contingent consideration of up to US$1.5 million to be paid in cash in June 2023 subject to the retention of its largest customers over the twelve-month period following the acquisition. WipeDrive was previously known as White Canyon Software Inc. before changing its name in 2021. WipeDrive has a suite of similar software tools to Blancco and over 500 government and private sector customers in the ITAD and Enterprise markets within North America and EMEA.
WipeDrive has been fully integrated into Blancco, with most employees being given new roles within the enlarged group. Our intention is to complete migration of all customers to a single Blancco branded solution over the coming months. The acquisition has led to a strengthened market position for Blancco along with some proprietary technologies that will be integrated with the Blancco solution to create an improved 'best of breed' solution in Enterprise and ITAD. The acquisition was immediately earnings enhancing and we have already seen WipeDrive's largest customer renew for a further twelve-month period since the acquisition took place.
Sales Team Reorganised and Strengthened
In March 2022, our President of Global Sales & Marketing, Alan Bentley, announced his intention to retire at the end of June 2022. Alan has led the Sales organisation through a period of prolonged growth and has left the Company in very good shape for his successor. We were delighted to announce Jon Mellon, who started in June 2022, as Alan's replacement. Jon has a long track record of success working at technology companies and was most recently the Chief Revenue Officer at Sonatype. Prior to his time at Sonatype, Jon held a number of senior sales leadership roles during a twelve-year tenure at NetApp. His most recent position at NetApp was VP and General Manager of Americas Commercial Sales in which he spearheaded the development and execution of a strategy focussing on sales, system engineering, and business development across a third of the Americas operation and highest growth segment in the company. During his tenure, NetApp doubled in size, a major feat given the scale and complexity of a multi-billion dollar enterprise.
One of Jon's first tasks for Blancco was to recruit a new VP of Sales in the North America region, a role which has been filled by Maurice Uenuma. Maurice has held a variety of roles in corporate strategy, business intelligence and strategic sales at Perot Systems and Dell and delved into cybersecurity through thought leadership and program management roles at the Council on Cybersecurity and the Center for Internet Security.
With both Jon and Maurice being based in the US, it was decided to reconsider the structure of the other regions. As a result, Fredrik Forslund has been appointed as VP of Sales in the International region, covering both APAC and EMEA. Fredrik was a co-founder and owner of SafeIT which was acquired by Blancco in 2014. Fredrik has been an advocate of data erasure solutions for over 20 years and is very well known and respected within the industry.
This reorganisation and strengthening of the Sales organisation has brought a new energy and expertise to the sales function which will be well placed to take advantage of the market tailwinds described above and lead to further periods of growth in the coming years.
Positive environmental impact
As detailed in our ESG report, the use of Blancco's solutions has resulted in the erasure of data from millions of devices during the year which meant that there was no requirement to destroy these devices to protect data. This directly contributes to a reduction in the generation of e-waste. Also, the recycling of IT assets enables hardware manufacturers to make significant carbon savings from manufacturing the next generation of IT assets. We are seeing manufacturers increase efforts in this field, demonstrated by Apple's commitment to becoming carbon neutral across its supply chain and products by 2030.
I am proud to say that Blancco has been even more proactive in this field and has achieved carbon neutrality for 2021. We are now in the process of implementing a decarbonisation plan to reduce our footprint and improve each of our intensity measures on an annual basis. As other organisations seek to achieve carbon neutrality, they will be analysing their supply chains to ensure that their suppliers have the lowest possible carbon footprint. The management of their IT assets will be a key aspect of that analysis.
We are also at the early stages of seeing regulation introduced in this area. As we saw with data protection regulation, this is being led by the European Union (EU), and in March 2022 a package of legislative measures was proposed in the CEAP. The legislative package aims to make almost all physical goods in the EU market more durable and therefore more environmentally friendly, sustainable and energy-efficient throughout their whole lifecycle, from the design phase to daily use, repurposing and end-of-life.
Social initiatives
The reality is that while Blancco has a solution which negates the need to destroy IT assets, a concerning majority of all IT equipment still ends up going to landfill. Blancco is proud to support a number of charitable initiatives which focus on redistributing assets to groups which can still obtain significant value from such assets, despite them being no longer considered of use by companies. An example of this comes from our work with the Turing Trust, which approached us earlier in the year to work with them, as they were facing challenges in obtaining donated IT assets from companies due to security concerns. They felt that being able to demonstrate that any donated devices would be fully erased using Blancco software would give donating companies confidence that the data stored on those devices could not be compromised. Since launching with Blancco, there has indeed been an increase in devices being donated which are subsequently sent to schools in Africa. We work with other charities to support underprivileged groups in the UK, Vietnam & Australia.
All organisations seeking to improve their social impact can locate groups where donated IT equipment would be gratefully received and the use of Blancco's data erasure solutions enables such donations to be made without fear of data being compromised.
Governance (i)
The introduction of GDPR within the EU in 2018 has in turn led to greater regulation of data around the world. Gartner forecasts that by the end of 2023, 75% of the world's population will have its personal data covered by modern privacy regulations. As a result, companies are spending increasing amounts on data protection with Gartner forecasting that this outlay will reach US$15 billion in 2024. Blancco's solutions ensure that any data stored on IT assets is permanently erased and cannot be breached when that asset is no longer in the possession of the company that previously owned it. There are also two particularly relevant pieces of legislation coming through in the US, which we believe will assist in driving further revenue:
-- California Privacy Rights Act (CPRA) - CPRA significantly expands and amends the California Consumer Privacy Act (CCPA) which took effect on 1 January 2020. CPRA will come into effect from 1 January 2023 and is considered to be the model that many other US states will follow in due course. The amendments introduced by CPRA will bring data privacy regulation much closer to GDPR.
-- Cybersecurity Maturity Model Certification (CMMC) - is an assessment framework and assessor certification program designed to increase the trust in measures of compliance to a variety of standards published by the National Institute of Standards and Technology (NIST). The regulation applies to all contractors to the United States Department of Defense and will in many cases require those contractors to ensure that data is fully erased to NIST standards before any media or equipment leaves the possession of a contractor. This must be certified by an assessor and will mean that offsite physical destruction is no longer adequate. These regulations are expected to be implemented in mid 2023.
Governance: EU regulation (ii)
In recent years we have seen the implementation of GDPR which was enforceable from May 2018. This has been followed by similar regulation in most other parts of the world. We are now seeing the EU lead the way again with environmental regulation arising from the CEAP. There are a number of initiatives in this regulation which we anticipate will drive demand for Blancco solutions:
-- The upcoming Ecodesign Working Plan will set out regulatory measures for electronics and IT including mobile phones, tablets and laptops under the Ecodesign Directive so that devices are designed for energy efficiency and durability, reparability, upgradability, maintenance, reuse and recycling;
-- Focus on electronics and ICT as a priority sector for implementing the 'right to repair', including a right to update obsolete software;
-- Regulatory measures on chargers for mobile phones and similar devices, including the introduction of a common charger, improving the durability of charging cables, and incentives to decouple the purchase of chargers from the purchase of new devices;
-- Exploring options for an EU-wide take back scheme to return or sell back old mobile phones, tablets and chargers;
-- Review of EU rules on restrictions of hazardous substances in electrical and electronic equipment and provision of guidance to improve coherence with relevant legislation, including REACH 24 and Ecodesign.
All of these initiatives are designed to extend the life of IT assets and reduce e-waste for the benefit of the environment. Alongside this is the draft Corporate Sustainability Reporting Directive (CSRD) which is expected to come into force in 2023 with reporting in 2024. This Directive is likely to require large EU companies, or EU subsidiaries of large companies (namely entities meeting two of the following three criteria: net turnover of EUR40m; balance sheet assets greater than EUR20m; and more than 250 employees), and certain small enterprises, to report against their environmental and social impact.
It isn't unusual, as we saw with GDPR, that the EU leads the way with regard to regulation and it is anticipated that many other parts of the world will follow suit as pressure increases on all organisations globally to operate in a more sustainable manner.
Summary and Outlook
While FY22 has been a further period of strong growth in revenue and profit, and strong underlying cash generation we believe there are a number of reasons to expect continued strong growth in future periods, across all measures:
-- Regulation is increasingly being implemented to motivate companies to operate more sustainably and produce less waste;
-- The acquisition of WipeDrive further improves the market position of Blancco and breadth of our solutions; and
-- The newly strengthened Sales management team is expected to have an immediately positive impact with a particular focus on Channel sales growth.
With a strong pipeline of opportunities as we enter the new financial year, the Board remains confident of delivering further periods of increased value for shareholders.
Matt Jones
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REPORT
Revenue
Organic revenue growth in FY22 was 11% excluding the impact of foreign exchange movements, corresponding to full year revenues of GBP39.3 million. The acquisition of WipeDrive on 8 June 2022 generated an additional GBP0.5 million of revenue in the period, with the consolidated Group generating revenues of GBP39.8 million, 9% growth including foreign exchange movements. This represents a strong end to the year for WipeDrive following the renewal of its largest customer in June 2022.
Growth Organic CER Growth
rate growth
Year ended rate
30 June 30 June
2022 2021
========================
Revenue (GBP millions) 39.8 36.5 +9% +8% +12%
======================== ======== ======== ======= ======== ===========
Revenue by geography
======================== ======== ======== ======= ======== ===========
North America 12.6 11.2 +12% +8% +11%
EMEA 15.6 13.4 +16% +16% +20%
Asia and ROW 11.6 11.9 -2% -2% +4%
======================== ======== ======== ======= ======== ===========
Revenue by market
type
======================== ======== ======== ======= ======== ===========
Enterprise 15.4 14.1 +8% +6% +10%
ITAD 13.8 11.5 +20% +19% +23%
Mobile 10.6 10.9 -2% -2% +2%
======================== ======== ======== ======= ======== ===========
Growth in ITAD revenue was particularly strong in the year with companies and economies opening up following the pandemic and catching up on a backlog of assets that reached end of life during lockdown periods. Much of this increase in ITAD activity was seen in the EMEA region leading to a particularly strong period of revenue growth in this territory.
Profitability Measures
Gross profit margin increased from 92% to 97% due to the elimination of costs relating to third party mobile diagnostics software which, for some customers, is bundled alongside the core Blancco technology. The Group has developed its own solution to perform these diagnostics, and as such these costs have reduced significantly versus the prior year. Cost of sales is now largely comprised of hardware, where the customer's use case may require a physical platform on which to perform the diagnostics and erasures of their equipment and media. However, this revenue stream continues to represent a minority of the Group's overall sales volume.
Our customer retention has been excellent, with 100% of all customers of GBP100k and above renewing contracts from 2021 to 2022. Across all customers spending over GBP5k in 2021, the average contract value, representing revenues both recognised in the year and contracted in future years, increased by 14%.
Adjusted operating profit for the period increased by 23% to GBP6.5 million (FY 2021: GBP5.3 million). Operating profit for the period was GBP1.9 million (FY 2021: GBP1.8 million). Adjusted operating margins grew from 14% in the prior year to 16% in FY 2022. This was achieved through improvement in revenue gross margins as noted above. This was offset by an increase in travel costs following the easing of the pandemic restrictions and some wage inflation, particularly among our software development team.
Year ended 30 June Year ended
2022 30 June
2021
GBP'000 GBP'000
===================================== ===================== =============
Operating profit 1,882 1,774
--------------------------------------- --------------------- -------------
Acquisition costs 542 -
Exceptional income - (837)
Amortisation of acquired intangible
assets 2,683 2,859
Share-based payments charge 1,387 1,490
--------------------------------------- --------------------- -------------
Adjusted operating profit 6,494 5,286
--------------------------------------- --------------------- -------------
Adjusted EBITDA for the period grew by 13% to GBP11.5 million (FY 2021: GBP10.2 million), giving an adjusted EBITDA margin of 29% (FY 2021: 28%).
Cash Flow
Operating cash flow reduced from GBP10.3 million to GBP9.9 million which was impacted by a strong billing period leading up to year end resulting in a large receivables balance at year end compared to the prior year. The majority of this debt has already been collected in Q1 2023 with the Group continuing to be exposed to low credit risk.
Adjusted operating cash flow remained flat at GBP10.8 million, corresponding to a cash conversion on adjusted EBITDA of 94% (2021: 106%).
Balance Sheet
Net funds fell to GBP6.2 million (30 June 2021: GBP10.1 million). This reduction was caused by two major cash outflows:
-- GBP7.2 million from the consideration and costs of the acquisition of WipeDrive in June 2022
-- GBP1.5 million to purchase Blancco shares for the Employee Benefit Trust in December 2021
A liability of GBP1.3 million has been provided for in the balance sheet in respect of the contingent consideration of up to US$1.5 million that could potentially become due to the vendors of WipeDrive in June 2023, plus a small amount relating to a working capital adjustment paid in August 2022.
R&D Expenditure
The Group continues to invest a significant amount in research and development ("R&D"), with expensed R&D costs totalling GBP1.1 million (2021: GBP1.2 million) and capitalised development costs totalling GBP4.1 million (2021: GBP4.2 million).
The R&D team has grown over the last 24 months both organically through ongoing investment and as a result of acquisitions of businesses, resulting in new development centres in Ireland and the US, albeit at a smaller scale than our existing footprint in Finland and India. They continue to focus on appraising and transitioning the technology associated with the WipeDrive product, as well as its patent portfolio, to determine where there are various product and platform enhancements that will further augment the core Blancco product offering.
WipeDrive
The acquisition of WipeDrive has been immediately earnings enhancing, contributing revenues of GBP0.5 million and adjusted operating profit of GBP0.4 million in the period between acquisition and year end. The integration of the business into Blancco has been positive with the employees working on roles spanning our combined North American operation. As the business has operated mainly in the ITAD and Enterprise markets, the pooling of the WipeDrive and Blancco resources has happened naturally and quickly, and many customers are now renewing contracts on Blancco products.
Adam Moloney
Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2022
Year ended Year ended
30 June 30 June
2022 2021
Continuing operations GBP'000 GBP'000
========================================== =============== ============ =============
Revenue 39,799 36,506
Cost of sales (1,290) (2,807)
====================================================== ================ ===========
Gross profit 38,509 33,699
Administrative expenses (including
depreciation and amortisation) (36,627) (31,925)
====================================================== ================ ===========
Operating profit 1,882 1,774
------------------------------------------------------ ---------------- -----------
Acquisition costs 542 -
Exceptional income - (837)
Amortisation of acquired intangible
assets 2,683 2,859
Share-based payments charge 1,387 1,490
------------------------------------------------------ ---------------- -----------
Adjusted administrative expenses (32,015) (28,413)
------------------------------------------------------ ---------------- -----------
Adjusted operating profit 6,494 5,286
------------------------------------------------------ ---------------- -----------
Finance income 6 121
Finance costs (201) (420)
====================================================== ================ ===========
Profit before tax 1,687 1,475
Taxation 364 (95)
====================================================== ================ ===========
Profit for the year from continuing
operations 2,051 1,380
====================================================== ================ ===========
Discontinued operations
Post tax profit from discontinued
operations - 331
====================================================== ================ ===========
Profit for the year 2,051 1,711
====================================================== ================ ===========
Attributable to:
Equity holders of the Company 2,024 1,697
Non-controlling interests 27 14
====================================================== ================ ===========
Profit for the year 2,051 1,711
====================================================== ================ ===========
Earnings per share Year ended Year ended
30 June 30 June
2022 2021
-------------------------------------- ----------- --------------------
Continuing operations:
Basic 2.71 p 1.84 p
Diluted 2.64 p 1.78 p
Discontinued operations:
Basic 0.00 p 0.45 p
Diluted 0.00 p 0.43 p
Total Group:
Basic 2.71 p 2.29 p
Diluted 2.64 p 2.21 p
---------------------------------------- ----------- --------------------
Year Year
ended Ended
30 June 30 June
2022 2021
GBP'000 GBP'000
-------------------------------------- ----------- --------------------
Profit for the year 2,051 1,711
Other comprehensive income/(expense)
- amounts that may be reclassified
to profit or loss in the future:
Exchange differences arising
on translation of foreign
entities 1,632 (5,862)
---------------------------------------- ----------- --------------------
Total comprehensive profit/(loss)
for the year 3,683 (4,151)
---------------------------------------- ----------- --------------------
Attributable to:
Equity holders of the Company 3,691 (4,049)
Non-controlling interests (8) (102)
---------------------------------------- ----------- --------------------
Total comprehensive profit/(loss)
for the year 3,683 (4,151)
---------------------------------------- ----------- --------------------
Consolidated Balance
Sheet
As at 30 June 2022
30 June 30 June
2022 2021
GBP'000 GBP'000
=============================== ========== ==========
Assets
Non-current assets
Goodwill 56,040 48,199
Other intangible assets 19,928 19,369
Property, plant and equipment 2,970 2,249
Deferred tax assets 107 119
79,045 69,936
=============================== ========== ==========
Current assets
Inventory 216 110
Trade and other receivables 8,954 6,204
Current tax asset 641 469
Cash and cash equivalents 8,195 10,071
18,006 16,854
=============================== ========== ==========
Total assets 97,051 86,790
================================ ========== ==========
Current liabilities
Trade and other payables (9,433) (7,767)
Contingent consideration (1,347) -
Current tax liability (291) (336)
(11,071) (8,103)
Non-current liabilities
Borrowings (2,000) -
Other payables (2,265) (1,131)
Deferred tax liabilities (3,971) (2,655)
(8,236) (3,786)
=============================== ========== ==========
Total liabilities (19,307) (11,889)
================================ ========== ==========
Net assets 77,744 74,901
================================ ========== ==========
Equity
Called up share capital 1,513 1,512
Share premium account 21,103 21,103
Merger reserve 5,861 5,861
Capital redemption reserve 417 417
Translation reserve 1,857 190
Retained earnings 46,438 45,255
============================= ======= =======
Total equity attributable
to equity holders of the
Company 77,189 74,338
Non-controlling interest
reserve 555 563
============================= ======= =======
Total equity 77,744 74,901
============================= ======= =======
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Non-controlling
interest
Called Share reserve Capital
up share premium Merger Translation Retained redemption
capital account reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============== ========== ========= ========= ============ ========== ================ ============= ========
Balance as at
1 July
2020 1,507 21,103 5,861 5,936 41,861 665 417 77,350
Comprehensive
income:
Profit for the
year - - - - 1,697 14 - 1,711
Other
comprehensive
expense
Exchange
differences
arising on
translation
of foreign
entities - - - (5,746) - (116) - (5,862)
Total
comprehensive
loss - - - (5,746) 1,697 (102) - (4,151)
Transactions
with owners
recorded
directly in
equity:
Issue of
shares 5 - - - (5) - - -
Share based
payment
charge
inclusive of
deferred tax
charge - - - - 1,702 - - 1,702
Balance as at
30 June
2021 1,512 21,103 5,861 190 45,255 563 417 74,901
Comprehensive
income:
Profit for the
year - - - - 2,024 27 - 2,051
Other
comprehensive
income
Exchange
differences
arising on
translation
of foreign
entities - - - 1,667 - (35) - 1,632
Total
comprehensive
profit - - - 1,667 2,024 (8) - 3,683
Transactions
with owners
recorded
directly in
equity:
Issue of
shares 1 - - - - - - 1
Purchase of
Company's
own shares - - - - (1,546) - - (1,546)
Share based
payment
charge
inclusive of
deferred tax
credit - - - - 705 - - 705
=============== ========== ========= ========= ============ ========== ================ ============= ========
Balance as at
30 June
2022 1,513 21,103 5,861 1,857 46,438 555 417 77,744
=============== ========== ========= ========= ============ ========== ================ ============= ========
Consolidated Cash Flow Statement
For the year ended 30 June 2022
Year Year
ended ended
30 June 30 June
2022 2021
GBP'000 GBP'000
=========================================== ========= ========
Profit for the year 2,051 1,711
============================================= ========= ========
Adjustments for:
Profit from discontinued operations - (331)
Net finance costs 195 299
Taxation (364) 95
Loss on disposal of intangible assets - 66
Profit on disposal of property, plant
and equipment - (6)
Depreciation of property, plant and
equipment 1,119 1,129
Amortisation of intangible assets 3,923 3,753
Amortisation of acquired intangible
assets 2,683 2,859
Share-based payments expense 1,387 1,490
============================================= ========= ========
Operating cash flow before movement
in working capital 10,994 11,065
--------------------------------------------- --------- --------
Acquisition costs 542 -
Exceptional income - (837)
--------------------------------------------- --------- --------
Adjusted EBITDA 11,536 10,228
--------------------------------------------- --------- --------
Increase in inventories (69) (19)
(Increase)/decrease in receivables (2,092) 588
(Increase)/decrease in payables and
accruals 1,496 (1,249)
Cash generated from continuing operations 10,329 10,385
--------------------------------------------- --------- --------
Acquisition costs payments 355 252
Share based payments 143 155
Adjusted operating cash flow 10,827 10,792
---------
Interest paid on lease liabilities (110) (95)
Other bank charges paid (25) (242)
Tax (paid)/received (261) 228
============================================= ========= ========
Net cash generated from operating
activities - continuing operations 9,933 10,276
Net cash generated from operating
activities - continuing and discontinued
operations 9,933 10,276
============================================= ========= ========
Cash flows from investing activities
Purchase of property, plant and equipment (157) (235)
Purchase and development of intangible
assets (4,453) (4,876)
Acquisition of subsidiaries, net of
cash acquired (6,873) (319)
Net cash used in investing activities
- continuing operations (11,483) (5,430)
Net cash used in investing activities
- continuing and discontinued operations (11,483) (5,430)
============================================= ========= ========
Cash flows from financing activities
Payment of the principal portion of
lease liabilities (784) (927)
Purchase of Company's own shares (1,546) -
Share issue, net of fees 1 -
Interest refunded* 73 54
Interest paid* (58) (18)
Drawdown of borrowings 3,000 -
Repayment of borrowings (1,000) -
Net cash used in financing activities
- continuing operations (314) (891)
Net cash used in financing activities
- continuing and discontinued operations (314) (891)
Net (decrease)/increase in cash and
cash equivalents (1,864) 3,955
Other non-cash movements - exchange
rate changes (12) (603)
Cash and cash equivalents at beginning
of year 10,071 6,719
============================================= ========= ========
Cash and cash equivalents at end of
year 8,195 10,071
============================================= ========= ========
Borrowings (2,000) -
Net funds 6,195 10,071
============================================= ========= ========
*Interest refunded and interest paid has been reclassified from operating activities to financing activities to better reflect the nature of the cashflows.
Notes to the Accounts
For the year ended 30 June 2022
1. Basis of Preparation
The financial information does not constitute statutory accounts within the meaning of Sections 434 to 436 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the financial year ended 30 June 2021 have been filed with the Registrar of Companies and those for the financial year ended 30 June 2022 were approved by the Board of directors on 27 September 2022 and will be delivered in due course. The auditor has reported on those accounts, their report was unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006. Whilst the financial information included in this announcement has been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards, this announcement does not itself contain sufficient information to comply with IFRS.
Going concern
The Group meets its day-to-day working capital through its cash reserves and a revolving credit facility, which expires in January 2024.
After making enquiries, the Board has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of at least 12 months from the date of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.
2. Earnings per share (EPS)
Year Ended Year ended
30 June 30 June
2022 2021
Pence Pence
=============================== =========== ===========
Continuing operations
Basic earnings per share 2.71 p 1.84 p
Diluted earnings per share 2.64 p 1.78 p
Adjusted earnings per share 7.81 p 5.77 p
Diluted adjusted earnings per
share 7.62 p 5.58 p
================================ =========== ===========
Discontinued operations
Basic earnings per share 0.00 p 0.45 p
Diluted earnings per share 0.00 p 0.43 p
Adjusted earnings per share 0.00 p 0.45 p
Diluted adjusted earnings per
share 0.00 p 0.43 p
================================ =========== ===========
Total Group
Basic earnings per share 2.71 p 2.29 p
Diluted earnings per share 2.64 p 2.21 p
Adjusted earnings per share 7.81 p 6.22 p
Diluted adjusted earnings per
share 7.62 p 6.01 p
================================ =========== ===========
Year ended Year ended
30 June 30 June
2022 2021
Continuing operations GBP'000 GBP'000
========================================= =========== ===========
Profit for the year 2,051 1,380
Profit attributable to non-controlling
interests (27) (14)
========================================== =========== ===========
Profit attributable to equity
holders of the parent company 2,024 1,366
========================================== =========== ===========
Reconciliation to adjusted profit:
Revaluation of contingent consideration - 62
Acquisition costs 542 -
Amortisation of acquired intangible
assets 2,683 2,859
Exceptional income - (837)
Amortisation of bank fees 8 3
Share-based payments charge 1,387 1,490
Tax impact of above adjustments (800) (667)
========================================== =========== ===========
Adjusted profit for the year 5,844 4,276
========================================== =========== ===========
The weighted average number of shares and reconciliation between basic and diluted measures is presented below:
Year ended Year ended
30 June
30 June 2022 2021
Number of shares '000s '000s
============================================== ============= ===========
Weighted average number of shares (excluding
bonus element and treasury shares) 74,776 73,964
Bonus element from share placing in July
2019 - 140
Basic 74,776 74,104
Impact of dilutive share options 1,877 2,573
============================================== ============= ===========
Diluted 76,653 76,677
============================================== ============= ===========
The bonus element increasing the basic number of shares used in the prior year earnings per share calculation arose from the placing of 8,000,000 shares in July 2019 and represents the number of shares effectively issued without consideration, due to the issue price of 125 pence being at a discount on the market price of 127.5 pence prior to the placing.
The dilutive share options are in respect of the shares awarded under the Blancco Performance Share Plan and Sharesave plan.
3. Profit for the year
Profit for the year for the Group has been arrived at after charging/(crediting):
Year ended Year ended
30 June 30 June
2022 2021
GBP'000 GBP'000
================================================= =========== ===========
Depreciation of property, plant and
equipment - owned 250 247
Depreciation of property, plant and equipment
- right of use asset 869 882
Loss on disposal of intangible
assets - 66
Profit on disposal of property, plant
and equipment - (6)
Amortisation of intangible assets 6,606 6,612
Expense relating to leases of low-value
assets 27 25
Cost of inventories recognised as
an expense 429 377
Research & Development expense 1,191 1,131
Staff costs recognised as an expense, excluding
share-based payments 19,777 17,507
Net foreign exchange loss/(gain) 220 (316)
==================================================== =========== ===========
4. Exceptional and acquisition (income)/costs
2022 2021
GBP'000 GBP'000
============================ ======== ========
Provision releases - (478)
COVID-19 support income - (359)
Acquisition and deal costs 542 -
============================ ======== ========
542 (837)
============================ ======== ========
Acquisition costs relate to the acquisition of WipeDrive Inc that was completed on 7 June 2022.
Exceptional income in the prior year arose from the release of provisions recognised on historical acquisitions that the business deemed to no longer to be required. These covered items that were exceptional in nature and did not relate to the underlying operating expenses of the acquired business and accordingly the releases were recorded through exceptional income.
Furthermore, in the prior year, a gain of GBP0.4 million arose from the forgiveness of US Payment Protection Program loans granted at the start of the COVID-19 pandemic.
5. Acquisitions
Acquisition of WipeDrive Inc .
On 7 June 2022 the Group completed the acquisition of 100% of the issued share capital of WipeDrive Inc for headline consideration of $10 million of which $8.5 million was satisfied in cash and further contingent consideration of up to $1.5 million to be paid in cash 12 months following completion subject to certain performance criteria. The consideration was also subject to a working capital adjustment which resulted in a further $0.1 million paid in August 2022.
In the year ended 30 June 2022, the acquisition has contributed revenue of GBP0.5 million and adjusted operating profit of GBP0.4 million. Had the acquisition completed on the first day of the financial year, it is estimated it would have contributed revenue of GBP2.7 million and adjusted operating profit of GBP1.1 million.
The provisional book value and fair value of the assets acquired, and liabilities assumed, were as follows:
Fair value
adjustments
Book value and IFRS alignment Fair value
GBP'000 GBP'000 GBP'000
============================================ ============= ==================== =============
Intangible assets arising on consolidation 584 2,055 2,639
Property, plant and equipment 31 458 489
Deferred tax - (1,080) (1,080)
Cash and cash equivalents 167 (1) 166
Inventory 31 (14) 17
Trade and other receivables 363 (8) 355
Trade and other payables (94) (566) (660)
Contract liabilities (1,516) 1,516 -
============================================ ============= ==================== =============
Net assets acquired (434) 2,360 1,926
============================================ ============= ==================== =============
Goodwill 6,460
============================================ ============= ==================== =============
Total consideration 8,386
Satisfied by:
Cash 7,039
Contingent consideration 1,347
============================================ ============= ==================== =============
Total consideration 8,386
============================================ ============= ==================== =============
The Directors identified a number of adjustments that were required to the book values, following a review of all balance sheet categories. These adjustments include the recognition of previously deferred revenue in accordance with IFRS 15 (GBP1,516,000), and the recognition of the associated deferred tax thereon. There were also employee related accruals totalling GBP93,000.
Under IFRS3 Business Combinations, separately identifiable intangible assets arising from the acquisition have been capitalised. These relate to technology of GBP1,964,000, customer contracts of GBP459,000 and marketing brand of GBP216,000. A deferred tax liability of GBP686,000 was recognised against these assets.
A right-of-use asset and associated liability of GBP458,000 was recognised with respect to a property lease held.
The goodwill of GBP6,460,000 was attributed to the anticipated growth of the combined Group, strategic benefits, synergies and workforces in place.
Contingent consideration
The acquisition includes deferred consideration to be paid in two instalments, relating to a working capital adjustment settled in August 2022 and a contingent payment up to $1.5 million which is due to be settled in June 2023. The estimated total cash outflow is $1.6 million (GBP1.3 million), for which a current liability has been established on the balance sheet as at 30 June 2022.
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END
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