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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Castleton Technology Plc | LSE:CTP | London | Ordinary Share | GB00BYV2WV72 | 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% | 94.75 | 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
TIDMCTP
RNS Number : 3143L
Castleton Technology PLC
18 July 2017
18 July 2017
Castleton Technology plc
("Castleton", the "Group" or the "Company")
Final Results
For the Year Ended 31 March 2017
Castleton Technology plc (AIM: CTP), the software and managed services provider to the public and not-for-profit sectors, announces its audited final results for the year ended 31 March 2017.
Financial Highlights
-- Revenue up 12% to GBP20.3m (2016: GBP18.0m) of which over 60% is recurring (2016: 58%) -- Adjusted EBITDA* up 22% to GBP4.4m (2016: GBP3.5m) -- Operating cashflow pre exceptionals up GBP4.0m to GBP4.6m (FY16: GBP0.6m)
-- Post exceptionals at GBP3.9m (FY16: outflow of GBP1.6m)
-- Operating cash conversion pre exceptionals at 105% (FY16: 16%)
-- Post exceptionals at 86%
-- Total net debt reduced from GBP10.0m to GBP9.4m -- Basic EPS up to 0.59p from a loss per share of (1.56p) for FY16
Operational Highlights
-- Customer base expanded to over 750 customers (including commercial customers)
-- 35% of customers now taking more than one product or service
-- Secured significant multi-year and multi-product contracts throughout the year, including:
-- 10 year contract with Clúid Housing Association in Ireland
-- 5 year contract with Arcon Housing Association in Manchester
-- 4 year contract with Wentworth Community Housing in Australia
-- Integration of acquired businesses largely complete -- Dean Dickinson appointed CEO on 31 October 2016
-- Paul Gibson today appointed Non-Executive Director with Ian Smith stepping down from the Board
-- Completed two further contracts at year end:
-- 7 year contract with North Hertfordshire Homes for the provision of a fully managed hosted desktop service
-- 3 year contract with a community regeneration and housebuilding company for Castleton's scheduling software product
Dean Dickinson, CEO of Castleton, said: "Our focus this year has been on completing the integration of acquired businesses and putting in place the right support to enable the business to scale effectively and profitably. I am therefore pleased to report that this has been achieved whilst also improving all of our key financial metrics.
"The new financial year has started in line with expectations, with a large, engaged customer base, a strong order pipeline and the right structure in place to maximise this significant market opportunity."
*Before net finance costs, depreciation, amortisation, exceptional costs and share based payment charges
The Annual Report and Accounts for the year ended 31 March 2017 will be posted to shareholders at least 21 days prior to the AGM and a copy is available on the Company's website at www.castletonplc.com.
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About Castleton Technology plc
Castleton Technology plc is a leading supplier of complementary software and managed services
to the public and not-for-profit sectors. The acquisitions of Montal, Documotive, Opus, Keylogic,
Brixx, Impact Applications and Kypera bring together an exceptional suite of solutions, providing
the foundation for this platform. Castleton works in partnership with its customers and resellers
to help drive efficiencies whilst improving controls and customer service. www.castletonplc.com
The information communicated in this announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
Chairman's Statement
Dear Shareholder
I am pleased to be able to report on another year of solid progress for Castleton. Following
the acquisitive growth of FY2015 and FY2016, FY2017 has been a year of consolidation as we
put in place firm foundations for the Group to build on its position as a successful niche
player in software and IT managed services within the public sector market place. The acquisition
of seven small companies brings great rewards but also significant integration efforts. Despite
early teething issues previously noted, I'm delighted to say that the business has now dealt
with these and as we enter our fourth year, we fully expect the company to demonstrate its
growth potential.
With respect to the year under review, I am encouraged that we have demonstrated our ability
to improve the mix of sales as the Company has successfully transitioned to targeting multiyear
SaaS software revenues whilst continuing to grow our overall sales. A key success in the year
has been clearly demonstrating the highly cash generative nature of our business model which
facilitated a reduction in our net debt.
The Board
There have been changes at Board level as the Group puts in place our foundations for future
growth.
Dean Dickinson joined the Board as CEO on 31 October 2016, replacing Ian Smith who became
Executive Deputy Chairman. Dean was previously Managing Director of Advanced Business Solutions,
part of Advanced Computer Software Group Limited (previously Advanced Computer Software plc
("ACS")), where he led the impressive growth of the Public Sector and Enterprise division
following the acquisition of COA Solutions in 2010. Dean was part of the senior management
team that sold ACS to Vista Private Equity for GBP725 million in March 2015.
Caro Bell resigned from the Board as Operations Director on 30 August 2016 having joined in
November 2015 and Davinder Sanghera resigned from the Board as Chief Operations Officer on
16th January 2017 having joined when Documotive was acquired by Castleton in November 2014.
Davinder was appointed as Chief Operations Officer on 9 April 2015. I would like to thank
them both for the hard work they have put in to help make Castleton the company it is today.
Opportunity / Outlook
The year has primarily been one of consolidation and we continue to see enormous potential
to become the go-to supplier for software and IT services in the social housing market. There
remain significant cross-selling opportunities within the customer base in order to provide
our customers with the technology and services that they require. The low penetration of our
comprehensive product and service set across our customer base combined with a healthy pipeline
of new business gives me confidence for the year ahead.
With the team currently in place, a broad customer base, a wide range of products and services
and solid cash flows enabling repayment of debt, I am confident of our future success and
I expect that the Group will show further growth when it next reports.
Chief Executive's Review
Overview
I am pleased to report the significant progress the Group has made during the financial year
to 31 March 2017. I arrived at the end of October 2016 with the Company having made multiple
acquisitions in prior years and the start of the financial year saw Castleton improve the
terms of its existing exclusive reseller agreement with 365 Agile Group plc ("Agile") granting
us an exclusive licence for Agile's suite of mobile working software solutions in relation
to the social housing sector. Each of the acquisitions has brought best in class software
solutions and managed services capability, so the foundations for a successful and scalable
business were already in place.
The focus during the year has also been on integrating the businesses acquired, and since
my arrival in October 2016, I have made further changes to the structure and organisation
which strengthened our platform and which will allow the Group to grow and maximise the opportunities
available in our chosen market.
Our Market and What We Do
The markets in which we operate are focused around public sector and not-for-profit social
housing but also include the contractors who provide repairs services to the social housing
providers. Castleton has six offices in the UK and a growing operation in Australia, demonstrating
our ability to grow and scale our business in a new geography.
The Group remains aligned along two divisions; Software Solutions and Managed Services, with
each focusing on their separate yet complementary offerings.
Our Software Solutions division provides all key business processes to social landlords covering
everything from tenant engagement, rent collection, financial planning and control, document
managing and repairs management. All key processes are available to be utilised on a mobile
platform via apps or digital engagement. The range of solutions provides customers with significant
improvements in service, performance and insight.
Our Managed Services division offers a wide range of IT Infrastructure solutions which support
an organisation's business objectives, including helping to drive efficiencies, manage legacy
architectures or providing customers and staff with the latest social, mobile and cloud technologies.
Trading Results
Revenue for the year showed an increase of 13% to GBP20.3 million (2016: GBP18 million) with
in excess of 60% of revenue being recurring in nature (2016: 58%). Adjusted EBITDA* showed
a stronger performance, improving by 22% to GBP4.4 million (2016: GBP3.6 million), reflecting
the Company's operational gearing and ability to scale profitably.
The underlying metrics of the business were particularly encouraging. The Managed Services
division's trading EBITDA** grew 31% year on year as we look to transition to more profitable
deals. The Software Solutions division's trading EBITDA** grew 15%.
Cash conversion was outstanding at 105% of adjusted EBITDA* pre exceptional costs and 86%
of adjusted EBITDA* post exceptional costs, enabling a reduction in net debt*** and, pleasingly,
earnings per share at a basic level were 0.59p, following a loss in the previous year of 1.56p
per share.
*earnings for the year from continuing operations before net finance costs, tax, depreciation,
amortisation, exceptional costs and share based payment charges.
** adjusted EBITDA before Group costs (i.e. the cost of the plc Board and its advisors)
*** net cash less borrowings, deferred and contingent consideration and convertible loan notes
Operational Review
Much of the focus this year has been on completing the integration of the companies acquired
since June 2014, which I am pleased to say is largely done, and building a platform and infrastructure
to enable continued profitable growth and take full advantage of the market opportunity. We
have made improvements to the quality of the business processes, people, structure and control.
The organic growth of the business is building on the back of the acquisitive growth. Our
contracted backlog of revenue has grown by over 40%, which gives us good forward visibility
of revenue.
The increase in revenues was driven by the addition of new customers and through cross-selling
of products and / or services into the Group's existing base. Castleton now supports over
750 customers and during the year the number of those who have two or more of our products
increased to 35%. Not only does this show traction in our intention to cross-sell and our
customers' confidence in our product suite, but also means that 65% of our customer base still
uses just one product, providing a very strong opportunity for further organic growth.
As referred to above, the start of the year, in April 2016, saw Castleton improve the terms
of its existing exclusive reseller agreement with Agile by entering into a new perpetual licence
agreement with the company whereby we were granted an exclusive licence for their suite of
mobile working software solutions in relation to the social housing sector.
New contracts signed during the year include a landmark agreement with Wentworth Community
Housing in Australia, signed in November 2016, for the provision of Kypera's housing system
and three other products including Agile's mobile working solutions. This followed on from
the installation of a local management team and is evidence of the opportunity available in
the Australian market and the relevance of Castleton's product suite in that country.
In January this year, two new contracts were announced, namely a ten-year agreement with Clúid
Housing Association ("Clúid") in Ireland and a five-year contract with Arcon Housing
Association ("Arcon") in Manchester. Both agreements were for multiple products and / or services,
with Clúid being the first customer to take the complete suite of software products,
validating the Group's intention of becoming a "one stop shop" serving the social housing
sector and showing the Group's ability to cross-sell and upsell the product suite. Our success
in winning these new contracts demonstrates the unique proposition that Castleton can bring
to the market and we continue to seek to expand on this success by increasing the number of
customers who take multiple products, which is a major focus going forwards.
At the end of the year, the Company had further success in signing two multi-year agreements,
extending both the contract base and the level of recurring revenue. The first is a seven
year contract with North Hertfordshire Homes and the second a three year contract with a community
regeneration and housebuilding company.
Post year end, a new operational structure has been put in place with clearly aligned objectives
and sales teams have been tasked with defined territories and targets. The initial feedback
has been positive, both internally and from customers.
Outlook
Castleton is well positioned to provide an eco-system of integrated modular solutions supported
by scalable infrastructure platforms, helping organisations to operate more effectively and
achieve their goals, whilst bringing visible recurring annuity revenues to the Group. The
Group brings together trusted brands with a pedigree of delivering solutions that meet customer
needs whilst offering a refreshing change of culture and approach, focusing on customer collaboration
using modern technology. We see the public and not-for-profit sectors as attractive markets
due to their niche requirements and we believe a significant opportunity exists to capitalise
on the ability to address historic under-investment in IT infrastructure in those sectors.
I am confident that the business is now in a position to maximise the opportunities that we
see in our chosen markets by offering our customers an integrated suite of products, either
on an installed or cloud delivery basis, in turn allowing them to increase efficiencies and
lower their costs of operating. Post year-end we have had a number of successes selling our
software products on a cloud basis. Combined with the general long term nature of the contracts
entered into, selling our products on a hosted basis gives greater recurring revenue and greater
visibility of earnings and cash flow as we move forward.
The new financial year has started well and in line with expectations. The Company has good
visibility of revenues, a strong and improving product suite combined with a defined roadmap
for further development, and an improved structure to enable us to execute our strategy. The
existing customer base provides a significant opportunity for cross-selling opportunities,
adding further organic growth along with new customers. The Board continues to view the future
with confidence.
Financial Review
I am pleased to present this report as Chief Financial Officer.
Principal events and overview
Other than the new licence agreement with Agile, further details of which can be found below,
the period since the last report has been one of consolidation compared to the previous two
years of considerable acquisitive activity.
As with the prior years, there has been a considerable amount of integration activity, partly
contributing to the GBP0.7 million exceptional charge within the Income Statement. Agile's
suite of solutions have been merged into Castleton Software Solutions Ltd, which, along with
Castleton Managed Services Ltd, form the two divisions in the Group. Also during the year,
we merged the offices acquired along with the acquisition of Impact Applications Limited into
our Software Solutions headquarters in Sutton Coldfield. With the exception of Kypera, all
acquired entities are on a common accounting platform across the Group, which brings a greater
degree of process and visibility to our back office operations. We plan to bring Kypera onto
our common accounting platform during the current year.
Agile
On 4 April 2016, the Group improved its existing exclusive reseller agreement with Agile and
entered into a new perpetual licence agreement whereby Castleton was granted an exclusive
licence for Agile's suite of mobile working software solutions in relation to the social housing
sector (the "Agile Licence").
Agile's software solutions are complementary to Castleton's range of solutions which have
been designed to enable social housing organisations to work more efficiently and effectively.
Agile's software solutions allow field based/ customer facing teams to securely access any
system, data and/ or document from any global location, allowing users to complete tasks in
real time.
To continue to support and develop the product, a number of staff members transferred from
Agile to the Group, and as a result, the grant of the licence and the transfer of staff collectively
meet the definition of a business combination under IFRS3 and consequently are recorded as
a business combination in these accounts.
Under the terms of the Agile Licence, Castleton will pay Agile GBP600,000 per year over a
three year period with the potential for a further payment of at least GBP300,000 in the year
to 31 March 2019 dependent on total sales during the first three years of the agreement.
The Board of Castleton believes that the Agile Licence and staff transfer are strategically
important as they secure the Group's use of Agile's software solutions going forward, whilst
enhancing the margin, with an estimated payback period of two years.
Goodwill
A fair value reassessment of GBP0.9 million was performed on Kypera, the majority of which
relates to claims in relation to onerous contracts that were in place prior to acquisition
together with the associated rectification costs. Discussions are currently ongoing, however,
the resolution of such claims remains uncertain.
Trading results
The trading results for the year comprise a full year of trading for all entities acquired
in the prior years and, from 4 April 2016, a full year of trading from the updated Agile Licence
Revenue and gross profit
Revenue amounted to GBP 20.3 million (2016: GBP18.0 million), of which GBP10.8 million was
generated by the Software Solutions division (2016: GBP8.3 million) and GBP9.4 million (2016:
GBP9.7 million) was generated by the Managed Services division. Recurring revenue is in excess
of 60% of total revenues (2016: 58%). Gross profit amounted to GBP14.3 million (2016: GBP11.3
million), representing a gross margin of 70% (2016: 63%). The increase in overall gross margin
is partly due to a full year of trading from the Kypera business which was acquired in the
previous year (and sits in the Software Solutions division) and has a higher gross margin
and also as a result of the new Agile Licence where there is no longer a 70% commission included
in cost of sales. Gross margin for the Software Solutions division increased from 80% to 84%
and for the Managed Services division it increased from 40% to 45%.
Administrative expenses including exceptional items
The administrative expenses from continuing activities were incurred in the running of the
acquired entities, and include the cost of the Board and its advisors, including the cost
of occupancy, back office support services, and the fees associated with maintaining the AIM
listing as well as amortisation and exceptional items. Exceptional items of GBP0.7 million
(2016: GBP2.2 million) include costs relating restructuring activities undertaken in the year.
Adjusted EBITDA*
The adjusted EBITDA for the year amounts to GBP4.4 million (2016: GBP3.6 million).
The cost in the year for the plc Board and its advisors was GBP1.3 million (2016: GBP1.2 million),
and we continue to maintain tight controls on expenditure.
Trading EBITDA was therefore GBP5.7 million (2016: GBP4.6 million).
*Earnings for the year from continuing operations before net finance costs, tax, depreciation,
amortisation, exceptional costs and share based payment charges.
Finance income and costs
Finance income represent the interest earned on deferred income from the sale of the consulting
business sold in 2015, and finance costs comprise interest payable on bank borrowings and
the interest and unwind of discount on the convertible loan notes issued in January 2016 to
part fund the acquisition of Kypera ("Loan Notes"). Finance income and costs amounted to GBP0.02
million (2016: GBP0.3 million) and GBP0.7 million (2016: GBP0.7 million) respectively.
Profit for the year attributable to the owners of the parent company
The Group profit for the year to 31 March 2017 was GBP0.5 million (2016: Loss of GBP1.1 million).
This comprises the loss before tax of GBP0.5 million (2016: loss of GBP1.9 million), which
includes the finance income of GBP0.02 million (2016: GBP0.3 million) and a tax credit of
GBP1.0 million (2016: GBP0.8 million) arising from R&D tax credits, unwind of deferred tax
on intangible assets and prior year adjustments.
Cash flow
Cash generated from operations during the year was GBP4.6 million (2016: GBP0.6 million) reflecting
a decrease in working capital of approximately GBP0.1 million (2016: increase of GBP3.0 million).
Net of cash acquired, GBP1.0 million of cash was used for the acquisition of subsidiaries
(GBP0.5 million for Brixx and GBP0.5 million for Agile) which was funded through cash generated
by the business.
This resulted in an overall increase in funds of GBP0.6 million, giving a net positive cash
position at the balance sheet date of GBP0.3 million (2016: net negative cash position of
GBP0.3 million).
Deferred income
Deferred income arises where revenue is invoiced ahead of delivery of performance obligations
and therefore recognition of revenue. This is common in software maintenance, hosting, managed
services and software subscription agreements. Invoicing is largely quarterly, half yearly
or annually and therefore deferred income levels fluctuate throughout the year. At 31 March
2017 deferred revenue of GBP8.4 million is GBP0.7 million higher than at the end of March
2016 due to growth in the above contracts.
Funding and Debt Repayment
During the year, the Group repaid GBP1.0 million of the Barclays term loan in line with the
facility agreement. As at the balance sheet date, GBP4.3 million of term loan was outstanding.
In addition, in March 2017, the Group repaid GBP0.5 million of the GBP3.5 million Loan Notes
issued to part fund the acquisition of Kypera. A further GBP0.5 million of the Loan Notes
were repaid in April 2017. The Loan Notes are capable of being converted into new ordinary
shares at a price of 85.6 pence per ordinary share, which represented a 5% premium to the
mid closing price on 28 January 2016, the day immediately prior to completion of the acquisition
of Kypera. Conversion is at the option of the holder at any time during the 5-year term.
On 29 May 2016, the final GBP0.5 million of deferred consideration for the acquisition of
Brixx was paid and also during the year, GBP0.5 million of the GBP1.8 million due under the
terms of the Agile Licence was paid.
During the year, GBP0.15 million of the GBP0.45 million of convertible loan notes that were
issued as part of the acquisition of Opus (the "Opus Loan Notes") were converted into shares.
Post year-end, the remaining GBP0.3 million of the Opus Loan Notes were cancelled in agreement
with the holders.
Going Concern
The Directors have prepared detailed cash flow projections including sensitivity analysis
on key assumptions. The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance and the timing of key strategic events, show the Group will
be able to operate within the level and conditions of available funding. Based on the funding
available, the Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis in preparing its consolidated
financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2017
Year Year
ended ended
31 March 31 March
2017 2016
Note GBP000 GBP000
Revenue 20,269 17,987
Cost of sales (5,980) (6,721)
------------------------------------------------------------------------ ---- ------------ ------------
Gross Profit 14,289 11,266
Administrative expenses (14,100) (12,759)
------------ ------------
Adjusted EBITDA* 4,383 3,601
Exceptional costs 3 (741) (2,184)
Depreciation (225) (168)
Amortisation (2,997) (2,542)
Charges for share-based payments (231) (200)
------------ ------------
Operating profit / (loss) 189 (1,493)
Finance income 5 21 321
Finance costs 5 (749) (728)
------------------------------------------------------------------------ ---- ------------ ------------
Loss on ordinary activities before taxation (539) (1,900)
Income tax 6 1,002 773
------------------------------------------------------------------------ ---- ------------ ------------
Profit/(loss) for the year attributable to owners of the parent company 463 (1,127)
------------------------------------------------------------------------ ---- ------------ ------------
Earnings /(loss) per share
Total basic profit / (loss) per share 7 0.59p (1.56p)
------------------------------------------------------------------------ ---- ------------ ------------
Total diluted profit / (loss) per share 7 0.54p (1.56p)
------------------------------------------------------------------------ ---- ------------ ------------
* Total result for the year before net finance costs, tax, depreciation, amortisation, exceptional costs and share-based payment charges
Consolidated Balance Sheet
As at 31 March 2017
31 March 31 March
2017 2016
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 8 33,605 32,674
Property, plant and
equipment 9 781 680
Trade and other receivables 10 261 418
34,647 33,772
-------------------------------- ---- -------- --------
Current assets
Inventories 50 187
Trade and other receivables 10 5,050 6,552
Current income tax asset 6 145 -
Cash and cash equivalents 11 586 823
-------------------------------- ---- -------- --------
5,831 7,562
-------------------------------- ---- -------- --------
Total assets 40,478 41,334
-------------------------------- ---- -------- --------
Equity and liabilities
Equity attributable
to owners of the parent
Share capital 1,625 1,612
Share premium account 16,995 16,758
Equity reserve 2,919 2,919
Other reserves 7,966 7,966
Accumulated loss (13,996) (14,690)
-------------------------------- ---- -------- --------
Total equity attributable
to the owners of the
parent 15,509 14,565
-------------------------------- ---- -------- --------
Liabilities
Current liabilities
Trade and other payables 12 8,836 8,880
Current income tax liabilities 6 - 340
Finance leases 46 24
Borrowings 13 1,324 2,194
Convertible loan notes 14 140 443
Deferred consideration 15 838 500
Provisions 751 332
-------------------------------- ---- -------- --------
11,934 12,713
-------------------------------- ---- -------- --------
31 March 31 March
2017 2016
Note GBP000 GBP000
Non-current liabilities
Trade and other payables 12 11,893 2,443
Borrowings 13 3,352 4,360
Convertible loan notes 14 2,957 3,277
Deferred consideration 15 707 -
Contingent consideration 15 748 -
Provisions - 224
Deferred taxation liabilities 6 3,377 3,762
------------------------------- ---- -------- --------
13,034 14,056
------------------------------- ---- -------- --------
Total liabilities 24,968 26,769
------------------------------- ---- -------- --------
Total equity and liabilities 40,478 41,334
------------------------------- ---- -------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 March 2017
Attributable to the owners of the
Parent Company
Called Share Equity Merger Accumulated Total
up premium reserve reserve Loss equity
share account (a) (b)
capital
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2015 1,206 10,689 1,423 7,966 (13,763) 7,521
Loss for the period - - - - (1,127) (1,127)
Transactions with
owners in their
capacity as owners:
Share based payments - - - - 200 200
Convertible loan
notes issued - - 600 - - 600
Conversion of
financial instruments 206 3,187 (40) - - 3,353
Exercise of options 16 119 - - - 135
Exercise of warrants 12 116 - - - 128
Issue of replacement
options - (936) 936 - - -
Share Issue 172 3,583 - - - 3,755
At 31 March 2016 1,612 16,758 2,919 7,966 (14,690) 14,565
Profit for the
period - - - - 463 463
Transactions with
owners in their
capacity as owners:
Share based payments - - - - 231 231
Conversion of
loan notes (c) 13 237 - - - 250
At 31 March 2017 1,625 16,995 2,919 7,966 (13,996) 15,510
------------------------ --------- --------- --------- --------- ------------ --------
(a) Equity reserve
The equity reserve consists of the equity element of convertible loan notes that were issued as part of the consideration for the acquisitions of Castleton Software Solutions Ltd, Keylogic Limited, Opus Information Technology Limited and Kypera Holdings Limited.
The fair value of the equity component of convertible loan notes issued is the residual value after deduction of the fair value of the debt component of the instrument from the face value of the loan note.
(b) Merger reserve
The merger reserve arose from the acquisition of Redstone Communications Limited (GBP216,000) and Maxima Holdings Limited (formerly Maxima Holdings plc) (GBP7,750,000) and represents the difference between the value of the shares acquired (nominal value plus related share premium) and the nominal value of the shares issued.
(c) Conversion of loan notes
On 8 July 2016, the company issued 250,000 new ordinary shares of 2 pence each ("Ordinary Shares") at a price of 40 pence pursuant to the conversion of loan notes issued as part of the previous acquisition of Opus Information Technology Limited. The vendors have undertaken not to sell or otherwise dispose of their interests in the new Ordinary Shares at any time during the 12 months following the admission of the new Ordinary Shares to trading on AIM.
On 4 October 2016, the company issued a further 375,000 new Ordinary Shares at a price of 40 pence pursuant to the conversion of loan notes issued as part of the previous acquisition of Opus Information Technology Limited. The vendors have undertaken not to sell or otherwise dispose of their interests in the new Ordinary Shares at any time during the 12 months following the admission of the new Ordinary Shares to trading on AIM.
Consolidated Cash Flow Statement
For the year ended 31 March 2017
31 March 31 March
2017 2016
Note GBP000 GBP000
------------------------------------- ----- ---------- ----------
Cash flows from operating activities
Cash generated from operations 16 4,581 589
Exceptional costs (797) (1,499)
Finance charges paid (256) (611)
Income taxes refunded / (paid) 133 (170)
------------------------------------- ----- ---------- ----------
Net cash flows generated from/
(used in) operating activities 3,661 (1,691)
Cash flows from investing activities
Receipt of deferred consideration
from sale of businesses 53 48
Acquisition of businesses net
of cash acquired (450) -
Acquisition of subsidiaries
net of cash acquired - (11,660)
Purchase of property, plant
and equipment (297) (167)
Purchase of intangible assets (309) (42)
------------------------------------- ----- ---------- ----------
Net cash flows used in investing
activities (1,003) (11,821)
------------------------------------- ----- ---------- ----------
Cash flows from financing activities
Proceeds from issuance of shares - 2,200
Cost of share Issue - (111)
Borrowings - 11,000
Exercise of share options - 135
Exercise of share warrants - 220
Settlement of deferred consideration (500) -
Repayment of borrowings (1,558) (788)
Net cash flows (used in)/generated
from financing activities (2,058) 12,656
Net increase/(decrease) in
cash and cash equivalents from
activities 600 (856)
Cash and cash equivalents at
1 April (330) 526
------------------------------------- ----- ---------- ----------
Cash and cash equivalents at
31 March 270 (330)
------------------------------------- ----- ---------- ----------
Comprising:
Cash and cash equivalents 11 586 823
Overdraft 13 (316) (1,153)
------------------------------------- ----- ---------- ----------
270 (330)
------------------------------------- ----- ---------- ----------
Notes to the Consolidated Financial Statements
Year ended 31 March 2017
1 Basis of preparation
The consolidated financial statements of Castleton have been prepared on the going concern basis and in accordance with EU adopted International Financial Reporting Standards (IFRS), IFRIC interpretations and the provisions of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.
Publication of non-statutory accounts
This summary does not constitute statutory accounts within the meaning of the Companies Act 2006. It is an extract from the full accounts for the year ended 31 March 2017 on which the auditor has expressed an unqualified opinion and does not include any statement under section 498 of the Companies Act 2006. The full accounts contain a detailed statement of the accounting policies which have been used to prepare this summary and remained unchanged from the prior year. The accounts will be posted to shareholders on or before 31 July 2017 and subsequently filed at Companies House.
A full set of the audited statutory accounts will be available at www.castletonplc.com
2 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Makers ('CODM'). The CODM has been identified as the Executive Board.
The Group is comprised of the following main operating segments:
Managed Services
In this segment are the results of Castleton Managed Services Ltd for the year ended 31 March 2017.
In the year ended 31 March 2016, this segment comprised the results of Castleton Managed Services Ltd for the year and Keylogic Limited, from 1 April 2015 to 20 September 2015, at which point the trade and assets of Keylogic were hived up into Castleton Managed Services Ltd.
The segment is engaged in the provision of IT infrastructure and support for businesses throughout the United Kingdom.
Software Solutions
This segment comprises the results of Castleton Software Solutions Ltd, Kypera Limited and Kypera Australia Pty Limited for the year ended 31 March 2017.
In the year ended 31 March 2016, this segment comprised the results of Opus Information Technology Limited for the period from 1 April 2015 to 30 November 2015 as well as Castleton Financial Modelling Solutions Ltd and Impact Applications Limited for the period from acquisition on 31 May 2015 to 30 November 2015.
On 1 December 2015 the trade and assets of Opus Information Technology Limited, Impact Applications Limited and Castleton Financial Modelling Solutions Ltd were hived up into Castleton Software Solutions Ltd.
The segment also included the results of Kypera Limited and Kypera Pty from the date of acquisition on 29 January 2016 to 31 March 2016.
The segment is engaged in the provision of document management, process management, customer relationship management solutions, provision of IT consultancy, IT solutions, software and finance software solutions and software support to the housing association sector.
Year ended 31 March 2017
Software
Managed Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
------------------------- ---------------- ---------- --------- --------
Revenue 9,437 10,832 - 20,269
------------------------- ---------------- ---------- --------- --------
Operating profit/(loss)
before amortisation of
intangible assets and
management charge 2,750 2,127 (1,691) 3,186
Amortisation of acquired
intangibles (969) (2,028) - (2,997)
Management charge (1,063) (368) 1,431 -
------------------------- ---------------- ---------- --------- --------
Operating profit /(loss) 718 (269) (260) 189
------------------------- ---------------- ---------- --------- --------
Finance income 20 - 1 21
Finance costs - (189) (560) (749)
------------------------- ---------------- ---------- --------- --------
Profit/(loss) before
tax 738 (458) (819) (539)
Adjusted EBITDA* 3,012 2,668 (1,297) 4,383
------------------------- ---------------- ---------- --------- --------
*Earnings for the year before net finance costs, tax, depreciation, amortisation, exceptional items, group management charge and share based payment charges.
Software
Managed Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- ---------------- ---------- --------- ----------
Segment Assets 11,454 31,757 (2,733) 40,478
Segment Liabilities (3,070) (13,535) (8,363) (24,968)
Net assets/ (liabilities) 8,384 18,222 (11,096) 15,510
Software
Managed Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- ---------------- ---------- --------- --------
Capital Expenditure:
Property, plant and equipment 186 114 26 326
Intangibles 25 284 - 309
Depreciation (125) (99) (1) (225)
Amortisation of intangibles (969) (2,028) - (2,997)
Year ended 31 March 2016
Software
Managed Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------------- --------------- -------------- ---------------
Revenue 9,665 8,322 - 17,987
----------------------------------- ---------------- --------------- -------------- ---------------
Operating profit/(loss)
before amortisation of intangible
assets and management charge 2,208 638 (1,797) 1,049
Amortisation of acquired
intangibles (945) (1,597) - (2,542)
Management charge (963) (575) 1,538 -
----------------------------------- ---------------- --------------- -------------- ---------------
Operating profit /(loss) 300 (1,534) (259) (1,493)
----------------------------------- ---------------- --------------- -------------- ---------------
Finance income 25 - 296 321
Finance costs (3) (7) (718) (728)
----------------------------------- ---------------- --------------- -------------- ---------------
Profit/(loss) before tax 322 (1,541) (681) (1,900)
Adjusted EBITDA* 2,301 2,318 (1,018) 3,601
----------------------------------- ---------------- --------------- -------------- ---------------
*Earnings for the year before net finance costs, tax, depreciation, amortisation, exceptional items, group management charge and share based payment charges.
Software
Managed Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- ---------------- ----------- --------- -----------------
Segment Assets: 12,778 28,354 202 41,334
Segment Liabilities (4,268) (10,019) (12,482) (26,769)
Net assets/ (liabilities) 8,510 18,335 (12,280) 14,565
Software
Managed Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- ---------------- ----------- --------- ---------------
Capital Expenditure:
Property, plant and equipment 121 39 7 167
Intangibles 42 - - 42
Depreciation (95) (71) (2) (168)
Amortisation of intangibles (945) (1,597) - (2,542)
Income streams originating outside of the United Kingdom comprised GBP353,000 in respect of Kypera Australia Pty Limited (2016: GBP38,000).
The Group had no customers who accounted for more than 10% of the Group's revenue during the year (2016: nil).
3 Exceptional costs
In accordance with the Group's policy in respect of exceptional costs the following charges were incurred for the year:
2017 2016
GBP000 GBP000
------------------------------------ ------- -------
Integration and strategic costs 295 488
Acquisition and reorganisation
costs 431 812
Opus- settlement of contingent
consideration - 734
Creation of restructuring provision
(see note 17) 15 65
Other reorganisation - 85
741 2,184
------------------------------------ ------- -------
4 Business Combinations
Agile
On 4 April 2016, the Group improved its existing exclusive reseller agreement with 365 Agile Group plc ("Agile") and entered into a new perpetual licence agreement with Agile whereby Castleton has been granted an exclusive licence for Agile's suite of mobile working software solutions in relation to the social housing sector.
To continue to support and develop the product, a number of staff members transferred from Agile to the Group, and as a result the grant of the licence and the transfer of staff collectively meet the definition of a business combination under IFRS3 and consequently are recorded as a business combination in these accounts.
Castleton will pay Agile consideration of GBP1.8 million payable over three years, with a contingent element payable depending on total revenue in the first three years of the agreement.
From the date of acquisition to 31 March 2017, Agile recorded revenue of GBP0.7 million and a profit before taxation of GBP0.2 million compared to profit before taxation of GBP0.2 million under the previous arrangement. The recorded revenue for the period 1 April 2016 to 3 April 2016 was GBP2,645 with a profit of GBP611.
The total goodwill, representing synergies expected to accrue to the enlarged group and the knowledge and ability of the workforce, and intangible assets arising from the business combinations is the difference between the fair value of consideration less the fair value of assets acquired, as set out below.
Total
Agile Kypera Impact Total
------------------------- ------------- ------------- ------------ ---------------
GBP000 GBP000 GBP000 GBP000
------------------------- ------------- ------------- ------------ ---------------
Deferred consideration 1,795 - - 1,795
Contingent consideration 619 - - 619
Fair value of purchase
consideration 2,414 - - 2,414
Less fair value
of assets acquired:
Software (2,189) - - (2,189)
Fair value adjustment - 912 43 955
Goodwill 225 912 43 1,180
------------------------- ------------- ------------- ------------ ---------------
Cash consideration is payable over three years for a value of GBP1.8 million, of which GBP0.5 million has been paid to date. Further contingent consideration of GBP0.3 million is payable if revenue from the software of GBP2.2 million is generated by 4 April 2019. Further contingent consideration will be paid at 50% of the revenue that exceeds the GBP2.2 million threshold. If the conditions are met the amounts payable are due to be paid within 90 days of 4 April 2019.
On acquisition the Directors assessed the business acquired to identify any intangible assets. Intellectual property met the criteria for recognition as intangible assets as it is separable and has a measurable fair value, being the amount for which an asset would be exchanged between knowledgeable and willing parties in an arm's length transaction.
For the intellectual property the fair value of the intangible assets was calculated by using the discounted cash flows arising from the revenue forecast.
A long term growth rate of 2.0% was applied with a discount rate of 9.9%. The reasonable economic life of the intellectual property was assumed to be 15 years.
Kypera
The assessment of the fair values of the assets and liabilities on acquisition has been completed. A fair value adjustment to goodwill was made in relation to an onerous contract provision which existed at the date of acquisition of GBP0.752 million which related to a customer claim and the associated rectification costs.
A further fair value adjustment of GBP0.16 million was made upon review of the acquisition balance sheet.
Impact
A fair value adjustment in relation to accrued costs was also created of GBP43,000.
Other
On 26 January 2017 the Group entered into individual agreements with the former owners of Keylogic to ensure that neither individual are able to compete with the company or a Group Company in the sale of hosted desktop services to a Social Housing Entity in exchange for GBP125,000 each payable in equal tranches in April 2017 and October 2017.
5 Finance income and costs
Finance income
2017 2016
GBP000 GBP000
--------------------------------- ------- -------
Fair value gain on interest rate
swap - 298
Other finance income 21 23
--------------------------------- ------- -------
21 321
--------------------------------- ------- -------
Finance costs
2017 2016
GBP000 GBP000
------------------------------------------------ ------- -------
Interest payable on bank loans
and overdrafts 278 581
Interest expense in respect of:
Convertible loan notes and deferred
consideration unwind 471 146
Finance lease obligations - 1
749 728
------------------------------------------------ ------- -------
6 Income Tax
(a) Tax on profit on ordinary activities
Total
----------------------------------- --- ----------------
2017 2016
GBP000 GBP000
----------------------------------- -------- -------
Corporation Tax
Adjustments in respect of prior
periods (617) -
Deferred tax
Origination and reversal of timing
differences (385) (773)
Total tax (credit) (1,002) (773)
The rate of UK Corporation tax for the year beginning1 April 2015 is 20% and will be19% from 1 April 2017 and 17% from the year beginning 1 April 2020. Deferred tax has been re-measured on the basis of these new rates and reflected in the financial statements.
(b) Reconciliation of the total income tax credit
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to losses of the consolidated entities as follows:
2017 2016
GBP000 GBP000
------------------------------------------ ------- -------
Loss from operations before taxation (539) (1,900)
Accounting loss multiplied by the UK
standard rate of corporation tax of
20% (2016: 20%) (108) (380)
Net items not deductible for tax purposes 154 185
Unrelieved losses - (50)
Adjustment to tax charge in respect
of previous year (617) -
Movement in unprovided deferred tax
and the effect of the change of tax
rate (431) (508)
------------------------------------------- ------- -------
Total income tax credit on operations (1,002) (773)
(c) Unrecognised deferred tax asset
The Group has unrecognised deferred tax assets in respect of losses and reliefs, of GBP9.1 million (2016: GBP13.7 million). The composition of these losses and reliefs is as follows: property, plant and equipment differences GBP3.1 million (2016: GBP4.8 million), short-term temporary differences GBP0.1 million (2016: GBP0.1 million) and tax losses of GBP5.9 million (2016: GBP8.8 million). Deferred tax assets have not been recognised in respect of losses and reliefs where it is the view of the Directors that it is not certain that future taxable profits of the nature required will be available to offset against any deferred tax asset
(d) Deferred tax liability
GBP000
------------------------------------ -------
At 31 March 2015 2,478
Business combinations 2,063
On acquisitions (6)
Credit to income statement (773)
------------------------------------ -------
At 31 March 2016 3,762
------------------------------------ -------
Credit to income statement (1,002)
Adjustment to tax charge in respect
of previous year 617
At 31 March 2017 3,377
------------------------------------ -------
Deferred tax liabilities arise in respect of the temporary differences on acquired intangible assets.
7 Earnings/loss per share
Basic earnings/loss per share and diluted earnings/loss per share are calculated using a weighted average number of shares of 78,339,832 and 86,215,879 respectively (March 2016: weighted average number of shares of 72,265,145 and 80,345,997).
2017 2016
GBP000 GBP000
Statutory EPS:
Total basic profit /
(loss) per share 0.59p (1.56p)
----------------------- -------- ----------
Total diluted profit
/ (loss) per share 0.54p (1.56p)
----------------------- -------- ----------
The weighted number of shares and the loss for the year ended 31 March 2016 for the purposes of calculating the fully diluted earnings per share are the same as the basic loss per share calculation. This is because the outstanding share options and warrants would have the effect of reducing the loss per ordinary share and would, therefore, not be dilutive under the terms of IAS 33.
8 Intangible assets
Customer
contracts
and related Development
Goodwill Software relationships Expenditure Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- -------- -------- -------------- ------------ -------
Cost
At 1 April 2015 5,209 618 12,622 94 18,543
Additions - - - 42 42
Business Combinations 5,827 2,844 8,604 - 17,275
At 31 March
2016 11,036 3,462 21,226 136 35,860
Additions - - 250 309 559
Business Combinations 1,180 2,189 - - 3,369
At 31 March
2017 12,216 5,651 21,476 445 39,788
---------------------- -------- -------- -------------- ------------ -------
Amortisation
At 1 April 2015 - (50) (568) (26) (644)
Charge for the
year - (349) (2,155) (38) (2,542)
---------------------- -------- -------- -------------- ------------ -------
At 31 March
2016 - (399) (2,723) (64) (3,186)
Charge for the
year - (498) (2,435) (64) (2,997)
At 31 March
2017 - (897) (5,158) (128) (6,183)
Net carrying
amount
---------------------- -------- -------- -------------- ------------ -------
31 March 2017 12,216 4,754 16,318 317 33,605
---------------------- -------- -------- -------------- ------------ -------
31 March 2016 11,036 3,063 18,503 72 32,674
---------------------- -------- -------- -------------- ------------ -------
31 March 2015 5,209 568 12,054 68 17,899
---------------------- -------- -------- -------------- ------------ -------
The amortisation in both years relates to operations, and is included in the profit / loss for the year from operations in the Income Statement within administrative expenses.
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired Goodwill is supported by calculating the discounted cash flows arising from the existing businesses. A long term growth rate of 2.0% was applied with a discount rate of 9.9%.
Impairment tests for goodwill
The recoverable amount of all cash generating units (CGU) has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management until 31 March 2018. Cash flows beyond this period are extrapolated using the estimated growth rates stated below.
For each of the CGUs with a significant amount of goodwill the key assumptions in addition to long term growth rate and discount rate used in the value-in-use calculations are as follows:
Managed Services
Gross margin - 44% Operating margin - 31%
Software Solutions
Gross margin - 90% Operating margin - 32%
For all cash generating units the long term growth rate assumed is 2.0%. The pre-tax discount rate used is 9.9%, which reflects management's risk-adjusted estimate of the weighted average cost of capital.
A reasonably possible adverse movement in any of the above key assumptions made would not give rise to impairment.
9 Property, plant and equipment
Equipment,
fixtures
Leasehold Network infrastructure and
property and equipment fittings Total
GBP000 GBP000 GBP000 GBP000
------------------------- --------- ---------------------- ---------- -------
Cost
At 1 April 2015 222 401 95 718
Additions 7 69 91 167
Business Combinations 23 39 93 155
At 31 March 2016 252 509 279 1,040
Additions 51 204 71 326
At 31 March 2017 303 713 350 1,366
-------------------------- ---------- ---------------------- ---------- -------
Accumulated depreciation
------------------------- ---------- ---------------------- ---------- -------
At 1 April 2015 24 160 8 192
Charge for the year 7 112 49 168
At 31 March 2016 31 272 57 360
Charge for the year 13 20 192 225
At 31 March 2017 44 292 249 585
-------------------------- ---------- ---------------------- ---------- -------
Net book amount
31 March 2017 259 421 101 781
-------------------------- ---------- ---------------------- ---------- -------
31 March 2016 221 237 222 680
31 March 2015 198 242 87 527
-------------------------- ---------- ---------------------- ---------- -------
As at 31 March 2017 included in equipment, fixtures and fittings are assets held under finance leases with a carrying value of GBP69,000 (2016: GBP54,000) on which the depreciation charge was GBP27,000 (2016: GBP11,000).
The depreciation for the year of GBP225,000 (2016: GBP168,000) and has been charged to administrative expenses.
A mortgage loan of GBP110,000 (2016: GBP118,000) is secured on a long leasehold property with a book value of GBP170,000. Short leasehold property has a book value of GBP89,000.
10 Trade and other receivables
2017 2016
GBP000 GBP000
-------------------------------- ------- -------
Trade receivables 3,929 5,281
Less: provision for impairment
of trade receivables (220) (344)
Trade receivables - net 3,709 4,937
Other receivables 435 625
Prepayments 906 990
Amounts due with 12 months 5,050 6,552
-------------------------------- ------- -------
Prepayments due after more than
12 months 261 418
-------------------------------- ------- -------
Total receivables 5,311 6,970
-------------------------------- ------- -------
As at 31 March 2017, trade receivables of GBP0.2 million (2016: GBP0.3 million) were impaired and fully provided for.
The carrying value of trade receivables that would otherwise be past due or impaired but whose terms were renegotiated were GBPnil. The individually impaired receivables relate to receivables over 182 days, customers in financial difficulty, customer acceptance issues and cancelled contracts.
As at 31 March 2017, trade receivables of GBP1.9 million were past due but not impaired (2016: GBP2.9 million). In the table below, these comprise the receivables over 30 days, which relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of net trade receivables which are past due and not impaired is as follows:
2017 2016
Days outstanding GBP000 GBP000
------------------- -------- --------
31-60 days 1,038 1,412
61-90 days 448 697
91-180 days 379 749
1,865 2,858
------------------- -------- --------
The provision is calculated by central management with local knowledge on a specific basis based on their best estimate of recoverability taking into account the age and specific circumstances relating to the debtor. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. The carrying amounts of the Group's trade and other receivables are denominated in pounds.
Movements on the Group provision for impairment of trade receivables are as follows:
GBP000
------------------------------------ ------
At 31 March 2015 83
Fair Value on Business Combinations 108
Utilised in year (84)
Created in year 237
At 31 March 2016 344
Utilised in year (324)
Created in year 200
------------------------------------ ------
At 31 March 2017 220
------------------------------------ ------
The creation and release of a provision for impaired receivables has been included in 'administrative expenses' in the income statement. Amounts charged to the allowance account are generally written-off, when there is no expectation of recovering additional cash.
The other asset classes within trade and other receivables do not contain impaired assets.
11 Cash and cash equivalents
2017 2016
GBP000 GBP000
------------------------------------ ------- -------
Cash at bank and in hand (excluding
overdrafts) 586 823
------------------------------------ ------- -------
The table below shows the balance with the major counterparty in respect of cash and cash equivalents.
2017 2016
Credit rating GBP000 GBP000
-------------- ------- -------
A 586 823
-------------- ------- -------
12 Trade and other payables
Current
2017 2016
GBP000 GBP000
----------------------------- ------- -------
Trade payables 297 1,645
Other payables 67 90
Taxation and social security 646 675
Accruals 1,180 1,257
Deferred income 6,645 5,213
8,835 8,880
----------------------------- ------- -------
Non-current
2017 2016
GBP000 GBP000
---------------- ------- -------
Deferred income 1,718 2,433
Other payables 175 -
1,893 2,433
---------------- ------- -------
13 Borrowings
Current
2017 2016
GBP000 GBP000
---------- ------- -------
Mortgage 8 8
Bank loan 1,000 1,033
Overdraft 316 1,153
1,324 2,194
---------- ------- -------
2017 2016
Non-current GBP000 GBP000
------------ ------- -------
Bank Loan 3,250 4,250
Mortgage 102 110
3,352 4,360
------------ ------- -------
The mortgage is secured over a long leasehold property. The property is held within fixed assets at a cost GBP0.2 million. The mortgage is repayable at an interest rate of 2.9% above base rate. The remaining term at 31 March 2017 is 137 months.
Overdraft facility
The Company has an overdraft facility of GBP2.5 million with Barclays. Interest is payable at 3.5% above LIBOR on the overdraft balance, which is repayable on demand. At the balance sheet date GBP0.3 million (2016: GBP1.15 million) of the facility had been utilised. The overdraft is secured on the assets of the group by way of fixed and floating charges.
Bank loan
On 31 May 2015, the Company entered into a loan facility agreement with Barclays Bank plc ("Barclays") for GBP5 million. Interest is payable at 3.5% above LIBOR on the outstanding balance, which is repayable at a rate of GBP250,000 per quarter over 5 years. On 31 January 2016, Barclays extended the facility by a further GBP1 million, which increased the payment terms by 12 months. The overdraft is secured on the assets of the group by way of fixed and floating charges.
14 Convertible loan notes
Opus Kypera Total
GBP000 GBP000 GBP000
------------------------ ------ ------- ------- -------
At 1 April 2015 - - -
Additions 443 3,500 3,943
Interest unwound - 28 28
Fair value adjustment - (251) (251)
--------------------------------- ------- ------- -------
At 31 March 2016 443 3,277 3,720
Interest unwound 22 280 302
Interest due to be paid (175) (175)
Conversion (250) - (250)
Repayments - (500) (500)
At 31 March 2017 215 2,882 3,097
--------------------------------- ------- ------- -------
Within one year 140 - 140
Over one year 75 2,882 2,957
--------------------------------- ------- ------- -------
215 2,882 3,097
--- --------------------------- ------- ------- -------
GBP0.4 million of convertible loan notes were issued in the year ended 31 March 2016 to satisfy the contingent consideration for the acquisition of Opus Information Technology Limited ("Opus Loan Notes"). The Opus Loan Notes were redeemable in cash or convertible into new ordinary shares of 2 pence each in the capital of the Company ("Ordinary Shares") at a price of 40 pence per Ordinary Share in various tranches: GBP0.15 million on 30 September 2016, GBP0.15 million on 30 September 2017 and GBP0.1 million on 30 September 2018. On 21 June 2017, it was agreed by the beneficiaries of the loan notes issued at the time of the Company's acquisition of Opus Information Technology Limited ("Opus") that they would waive the remaining GBP0.25 million of loan notes in lieu of surrendering any potential warranty claims under the sale and purchase agreement. On 8 July 2016, the company issued 250,000 new Ordinary Shares pursuant to the conversion of loan notes issued as part of the previous acquisition of Opus Information Technology Limited. A further 375,000 Ordinary shares pursuant to the conversion of loan notes were issued on 4 October 2016, all in part settlement of the balance.
The noteholder can convert the loan note at any time given sufficient notice is provided per the agreement. Interest is accrued on the compounding amount at 5% per annum.
In addition on 31 January 2016, in order to fund the acquisition of Kypera, the Company issued GBP3.5 million of unsecured loan notes ("Kypera Loan Notes"), which have a term of 5 years and carry interest at a rate of 5% per annum, which is rolled up into the loan. The Kypera Loan Notes can be converted into new Ordinary Shares at a price of 85.6 pence per Ordinary Share. Conversion is at the option of the holder at any time during the 5 year term. The Company can redeem the Kypera Loan Notes from the third anniversary of issue if not already converted and earlier by request.
On 31 March 2017 GBP0.5 million of the Kypera Loan Notes were repaid. A further repayment of GBP0.5 million was made on 27 April 2017 in respect of the Kypera Loan Notes.
15 Deferred and contingent consideration
Current
2017 2016
GBP000 GBP000
----------------------- ------- -------
Deferred consideration 838 500
838 500
----------------------- ------- -------
2017 2016
Non-current GBP000 GBP000
------------------------- ----------------------- -------
Deferred Consideration 707 -
Contingent consideration 748 -
1,455 -
------------------------- ----------------------- -------
Castleton will pay Agile consideration of GBP1.8 million payable over four years, with a contingent element payable depending on total revenue in the first three years of the agreement. The Group believes that this is strategically important, as it secures the use of the Agile product going forward whilst enabling Castleton to keep 100% of the revenue associated with sales thereof by the Group, compared to having a 70% commission payable to Agile under the previous agreement. Cash consideration is payable over four years for a value of GBP1.8 million, of which GBP0.5 million has been paid to date. Further contingent consideration of GBP0.3 million is payable if revenue from the software of GBP2.2 million is generated by 4 April 2019. A further contingent fee will be paid at 50% of the revenue that exceeds the GBP2.2 million threshold. If the conditions are met the amounts payable are due to be paid within 90 days of 4 April 2019. The balance shown as due after more than one year includes the unwinding of the discount on deferred consideration.
On 26 January 2017 the Group entered into individual agreements with the former owners of Keylogic to ensure that neither individual are able to compete with the company or a Group Company in the sale of hosted desktop services to a Social Housing Entity in exchange for GBP125,000 each payable in equal tranches in April 2017 and October 2017.
16 Net cash flows from operating activities
2017 2016
GBP000 GBP000
--------------------------------------- ----------- -----------
Loss on ordinary activities before
taxation (539) (1,900)
Adjustments for:
Exceptional items 797 1,499
Net finance costs 727 407
Non-cash contingent consideration
through income statement - 695
Depreciation of property, plant and
equipment 225 168
Amortisation of intangibles 2,997 2,542
Equity-settled share-based payment
charge 231 200
Movements in working capital:
Decrease/ (increase) in trade and
other receivables 1,514 (1,907)
Decrease in trade and other payables (950) (509)
Decrease in provisions (558) (461)
Decrease/ (increase) in inventories 137 (145)
Cash generated from operations 4,581 589
--------------------------------------- ----------- -----------
17 Subsequent events
On 27 April 2017, the Group repaid a further GBP0.5 million of the GBP3.5 million of unsecured convertible loan notes that were issued on 29 January 2016 to assist in the funding for the acquisition of Kypera ("Loan Notes"). This was in addition to the GBP0.5 million Loan Notes repaid on 29 March 2017. On 21 June 2017 it was agreed by the beneficiaries of the loan notes issued at the time of the Company's acquisition of Opus Information Technology Limited ("Opus") to waive their remaining loan notes in consideration of surrendering any potential warranty claims under the sale and purchase agreement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFFEEWFWSEIW
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July 18, 2017 02:00 ET (06:00 GMT)
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