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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 : 4131G
Castleton Technology PLC
06 November 2018
Castleton Technology plc
("Castleton", the "Group" or the "Company")
Unaudited Interim Results for the Six Months Ended 30 September 2018
Castleton Technology plc (AIM: CTP), the software and managed services provider to the public and not-for-profit sectors, today announces its unaudited interim results for the six months ended 30 September 2018.
Financial Highlights
-- Revenues increased 20% to GBP12.9 million (H1 FY18: GBP10.8 million). Organic(i) revenue growth of 12%.
-- Adjusted EBITDA(ii) increased 31% to GBP3.0 million (H1 FY18: GBP2.3 million). Organic(i) Adjusted EBITDA grew by 18%.
-- Cash generated from operations of GBP3.0 million (H1 FY18: GBP2.3 million) which is 102% cash
conversion(iii) (H1 FY18 103%).
-- Strong Professional Services growth in the period of 44% has led to a change in revenue mix. Recurring revenues of GBP7.0m comprise 55% of total revenue (H1 FY18: recurring revenues of GBP6.8m comprise 63% of total revenue).
-- Profit before tax for the period of GBP0.5 million (H1 FY18: GBP0.2 million)
-- Net debt(iv) as at 30 September 2018 of GBP5.3 million (30 September 2017: GBP8.0 million), down from GBP6.3 million as at 31 March 2018
-- Intention to implement a progressive dividend policy for the full year
Operational Highlights
-- Significant new Managed Services contract win with Dumfries and Galloway Housing Partnership ("DGHP")
-- Significant Managed Services contract extension with existing customer Circle Voluntary Housing Association ("Circle") following a full tender process
-- Acquisition of perpetual software licence in relation to the platform upon which Castleton's modelling solution(v) is based with no more licence fees payable, enhancing the Group's gross margin by c.GBP0.3 million per annum.
-- Organisational integration and legal hive up of Kinetic Information Systems Pty Ltd ('Kinetic') completed, with cross sell of Castleton solutions to the Kinetic customer base underway.
-- Growth in contracted backlog of 12% in Software Solutions and 14% in Managed Services year on year
-- Strong customer retention and visibility over revenues with social housing customer base now 564, compared to 552 as at 31 March 2018.
Post-Period Highlights
-- Launch of Castleton.DIGITAL, an interactive platform designed to improve the services between residents and housing providers
-- Shareholder and Court approval for capital reduction, giving the Company the ability to make distributions to shareholders
David Payne, Chairman of Castleton, commented:
"I am pleased with the progress the Group has made in the first six months of FY19, with the strong organic growth achieved demonstrating Castleton is delivering against its stated strategy. Additionally, new contract wins and the acquisition of the perpetual software licence in relation to the platform upon which Castleton's modelling solution(v) is based further strengthens Castleton's position in the market and offering to customers. The Board remains optimistic about the Group's success and is confident that the growth achieved during the period will continue as we further cross-sell into our customer base. Since the period end, the Company has successfully obtained approval for a capital reduction process which gives the Company the ability to make distributions to shareholders and it is our intention to commence a progressive dividend policy for the full year."
(i) Organic growth is stated after adjusting for;
-- The full year effect of Kinetic Information Systems Pty Ltd ("Kinetic"). During the period the trade and assets of Kinetic were hived up into Castleton Technology Pty Ltd.
-- The impact of IFRS 15 'Revenue from customer contracts', which is effective for the current period and has been adopted on a cumulative basis from the date of initial application, without restatement of comparative amounts.
(ii) Before net finance costs, tax, depreciation, amortisation, exceptional items and share based payment charges
(iii) Cash conversion is calculated as cash generated from operations divided by Adjusted EBITDA(ii)
(iv) Including deferred consideration and interest accrued on loan notes. For the period ended 30 September 2017 including contingent consideration.
(v) Castleton's modelling solution, Castleton Strategic Modelling, was formerly named HousingBrixx, and was acquired in 2015 with an option to acquire the exclusive, perpetual and assignable licence. This option was exercised during the period.
Please see a video of the Company's results here http://bit.ly/CTP_H118_overview
Enquiries:
Castleton Technology plc Tel. +44 (0)845 241 0220 Dean Dickinson, Chief Executive Officer Haywood Chapman, Chief Financial Officer finnCap Tel. +44 (0)20 7220 0500 Jonny Franklin-Adams / Simon Hicks Alma PR Tel. +44 (0)7961 075844 Rebecca Sanders-Hewett Helena Bogle Josh Royston
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 Group is a 'one stop shop', providing integrated housing systems via the Cloud, working 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 is inside information for the purposes of Article 7 of Regulation 596/2014.
Chairman's Statement
Dear Shareholder
I am pleased to report the results of the Group for the six months ended 30 September 2018. Castleton has again made solid progress during the period, resulting in double digit organic growth and growing customer penetration. We continue to capitalise on cross-selling opportunities and it is evident that customers value our ability to offer a one-stop-shop for integrated housing solutions. We believe the market opportunity remains large and Castleton is well placed to continue building a scalable, cash generative, subscription-based business.
Operational Review
During the period we completed a number of significant milestones. The acquisition of the perpetual software licence in relation to the platform upon which Castleton's modelling solution is based enables Castleton to use, modify, maintain, distribute and sell the platform. Due to this, no further licence fees are payable leading to an increase in margin for the Group of approximately GBP0.3 million per annum in relation to sales of Castleton Strategic Modelling.
The Group completed two important contract wins during the period. The DGHP contract, worth GBP1.2 million over four years, will provide a full end-to-end managed service offering that demonstrates the progress within our stated strategy of growing recurring revenue and building long term prospects within the core customer base. It also highlights how well-placed we are to win new customers and quality contracts within our chosen sectors. The managed services contract with longstanding customer Circle, extended after a competitive full tender process win, complements the six hosted software products it already receives from Castleton and further demonstrates the Group's ability to cross-sell, providing additional revenue streams.
The launch of Castleton.DIGITAL post period end addresses the wider ongoing market shift towards digitalisation. The platform offers a flexible solution that can link every other existing system together, integrating customer data currently stored in separate silos into a single, simple to use solution. We believe this platform, which is a first for the social housing market, will enable us to continually improve our software in order to adapt to market changes, while also generating further cross-selling opportunities.
Our contracted backlog of revenue has grown 12% (Software Solutions) and 14% (Managed Services) year on year which gives us good forward visibility. We remain focused on product development with the aim of providing our customers with the technology and services they require to operate effectively and achieve their goals.
Trading and Results
The Group generated revenue for the six months to 30 September 2018 of GBP12.9 million (H1 FY18: GBP10.8 million), an increase of 20%. Revenue in the Software Solutions division increased 21% and revenue in the Managed Services division increased 18% when compared to H1 FY18. Strong Professional Services growth in the period of 44% has led to a change in mix, with recurring revenues of GBP7.0m comprising 55% of total revenues (H1 FY18: recurring revenues of GBP6.8m comprising 63% of total revenues). Further growth in recurring revenue is expected due to the increasing number of multi-year contracts being entered into, as well as our success in selling products on a hosted basis. In the period, a total of nine financial modelling customers signed up to receive hosting of the software.
The Group generated an Adjusted EBITDA* of GBP3.0 million in the period (H1 FY18: GBP2.3 million). Adjusted EBITDA* for the Software Solutions division (pre central costs) increased 62% when compared to H1 FY18 driven by strong growth in Professional Services and improved gross margin from our financial modelling solution. In Managed Services Adjusted EBITDA* (pre central costs) was flat year on year as a result of investment in management and operational capability as we look to grow the business and is reflective of the time taken to on board new managed services contracts such as DGHP. Central costs amounted to GBP0.8 million (H1 FY18: GBP0.7 million) of Adjusted EBITDA*.
IFRS 15 (Revenue from customer contracts) is effective for the Group for the period starting 1 April 2018. The Group has applied IFRS 15 on a cumulative effect basis from the date of initial application (1 April 2018), without restatement of comparative amounts. The quantitative impact of IFRS 15 on the interim 2019 financial statements is; a GBP0.1 million reduction in revenue and a GBP0.1 million reduction in cost of sales and administrative expenses in total, resulting in no material change to operating profit for the period ended 30 September 2018 and an increase in deferred income of GBP1.2 million and an increase in deferred costs of GBP1.0 million, both as at 30 September 2018.
With the integration of UK businesses completed, the cost base has stabilised, resulting in administrative expenses of GBP8.1 million (H1 FY18: GBP6.7m) being in line with H2 FY18 administrative expenses of GBP8.1 million. Included within administration expenses is a GBP0.6 million charge for share based payments (H1 FY18 GBP0.1 million), which has increased due to full year impact of awards made during the prior year and an acceleration of charge on options which have vested in the period.
There were no exceptional costs in H1 FY19 (H1 FY18: GBP0.1 million).
Net finance costs amounted to a P&L charge of GBP0.1 million (H1 FY18: GBP0.2 million).
The increase in revenues, stabilisation of the cost base and no exceptional costs has contributed to a profit before tax of GBP0.5 million (H1 FY18: GBP0.2 million). This is after amortisation of intangibles of GBP1.6 million (H1 FY18: GBP1.5 million). The amortisation of intangibles and utilisation of brought forward tax losses, alongside a reduction in future tax rates have resulted in a deferred tax credit of GBP0.2 million (H1 FY18: GBP0.4 million). This has been offset by a GBP0.2 million current tax charge (H1 FY18: nil), due to higher profits chargeable to corporation tax in the period, leading to profit after tax of GBP0.5 million (H1 FY18: GBP0.6 million).
Basic earnings per share ('EPS') from continuing activities was 0.68p (H1 FY18: 0.80p). Diluted EPS from continuing activities was 0.65p (H1 FY18: 0.75p). The reduction from H1 FY18 resulted from a GBP0.4 million reduction in the tax credit for the period, partly offset by a GBP0.3 million increase in profit before tax. The basic and diluted EPS as at 31 March 2018 of 5.23p and 5.00p respectively were due to exceptional credits and recognition of deferred tax assets related to unused capital allowances and therefore the EPS as at 30 September 2018 was expected to be lower than at the prior year end.
* Before net finance costs, tax, depreciation, amortisation, exceptional items and share based payment charges
Cash Flow and Net Debt
Cash generated by operations amounted to GBP3.0 million (H1 FY18: GBP2.3 million) comprising Adjusted EBITDA* of GBP3.0 million (H1 FY18: GBP2.3 million) and operating working capital movements of GBP0.1 million (H1 FY18: GBP0.1 million). This gave a cash conversion of EBITDA of 102% (H1 FY18: 103%).
Net finance charges paid of GBP0.1 million (H1 FY18: GBP0.1 million) reflect the cash cost of the interest on the loan with Barclays, the balance of which has decreased due to repayments of GBP0.5 million (H1 FY18: GBP0.5 million) made during the period. As at the balance sheet date, GBP2.75 million of the term loan was outstanding.
The total decrease in cash and cash equivalents was GBP0.4 million (H1 FY18: increase of GBP0.1 million). Net debt** at the period end stood at GBP5.3 million, down from GBP6.3 million as at 31 March 2018 and GBP8.0 million as at 30 September 2017.
* Before net finance costs, tax, depreciation, amortisation, exceptional items and share based payment charges
** Including deferred consideration and interest accrued on loan notes. For the period ended 30 September 2017 including contingent consideration.
The Board
There have been no changes in the Board during the first half of 2019.
Further to the sale by MXC of their shareholding in Castleton Technology plc, I am pleased to have retained the services of Paul Gibson as a Non-Executive Director, acting in an independent capacity.
Summary and Outlook
We are pleased to report that Castleton has continued to perform well in delivering a further period of significant organic growth in both revenues and profit, underpinned by ongoing excellent cash generation. The Group has achieved operational milestones including securing key contract wins in Managed Services, whilst in Software Solutions the acquisition of the perpetual software licence in respect of the platform upon which Castleton's financial modelling solution is based has enhanced Group gross margin.
Cross-selling opportunities continue to be a significant opportunity to further penetrate our customer base, with 84% of new sales during the period being to existing customers. There is still significant opportunity to further penetrate our customer base, with the launch post period end of Castleton.DIGITAL providing our customers with a further solution to help them with their digitisation journey.
The market opportunity remains large and given the Group's now established position as a 'one-stop-shop' serving the social housing sector, the Board is very optimistic about the Group's continued growth prospects."
David Payne
Non-Executive Chairman
Consolidated Statement of Comprehensive Income
Hot Features
Premium
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
Note GBP000 GBP000 GBP000
---------------------------------------- ----- ------------ ------------ ------------
Revenue 2 12,911 10,785 23,279
Cost of sales (4,222) (3,633) (7,211)
---------------------------------------- ----- ------------ ------------ ------------
Gross profit 8,689 7,152 16,068
Administrative expenses (8,072) (6,666) (14,770)
Exceptional charges - (347) (576)
Exceptional credits - 214 1,420
---------------------------------------- ----- ------------ ------------ ------------
Operating profit 617 353 2,142
Finance income 8 16 26
Finance costs (128) (185) (340)
---------------------------------------- ----- ------------ ------------ ------------
Profit on ordinary activities before
taxation 497 184 1,828
Income tax credit 3 47 442 2,295
---------------------------------------- ----- ------------ ------------ ------------
Profit for the period attributable to
the owners of the parent company 544 626 4,123
Items that may be subsequently reclassified
to profit or loss
Foreign operations - foreign currency
translation differences 20 29 41
----------------------------------------------- ------------ ------------ ------------
Total comprehensive income for the period
attributable to the owners of the parent
company 564 655 4,164
----------------------------------------------- ------------ ------------ ------------
Earnings per share 4
Basic earnings per share 0.68p 0.80p 5.23p
Diluted earnings per share 0.65p 0.75p 5.00p
---------------------------------------- ----- ------------ ------------ ------------
Non GAAP measure: Adjusted EBITDA
Operating profit 617 353 2,142
Depreciation and amortisation 1,749 1,631 3,333
---------------------------------------- ----- ------------ ------------ ------------
EBITDA 2,366 1,984 5,475
Share-based payments 603 143 484
Exceptional credits - (215) (1,420)
Exceptional charges - 348 576
---------------------------------------- ----- ------------ ------------ ------------
Adjusted EBITDA* 2,969 2,260 5,115
---------------------------------------- ----- ------------ ------------ ------------
*Earnings for the period from continuing operations before net finance costs, depreciation, amortisation, exceptional items, and share based payment charges.
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
Note 30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------- ------- -------------- -------------- ----------
Assets
Non-current assets
Intangible assets 32,501 32,300 32,075
Property, plant and equipment 847 900 872
Trade and other receivables 5 539 148 250
Deferred tax asset 1,410 - 1,462
35,297 33,348 34,659
------------------------------- ------- -------------- -------------- ----------
Current assets
Inventories 87 72 72
Trade and other receivables 5 6,583 4,527 6,385
Current income tax receivable 154 91 516
Cash and cash equivalents 183 571 510
------------------------------- ------- -------------- -------------- ----------
7,007 5,261 7,483
------------------------------- ------- -------------- -------------- ----------
Total assets 42,304 38,609 42,142
------------------------------- ------- -------------- -------------- ----------
Equity and liabilities
Equity attributable to owners
of the parent
Called up share capital 1,677 1,625 1,628
Share premium account 18,835 16,995 17,006
Equity reserve 144 2,668 251
Translation reserve 61 29 41
Other reserves 7,966 7,966 7,966
Accumulated loss (7,386) (12,976) (8,383)
------------------------------- ------- -------------- -------------- ----------
Total equity attributable
to owners of the parent 21,297 16,307 18,509
------------------------------- ------- -------------- -------------- ----------
Consolidated Statement of
Financial Position (cont.)
Unaudited Unaudited Audited
Note 30 30 September 31
September 2017 March
2018 2018
GBP000 GBP000 GBP000
------------------------------- ------- ----------- -------------- --------
Liabilities
Current liabilities
Trade and other payables 6 11,343 8,611 11,080
Finance leases - 22 -
Borrowings 1,086 1,223 1,008
Deferred consideration 435 717 592
Liability in respect of MXC
Scheme settlement - - 1,662
Provisions 81 721 121
------------------------------- ------- ----------- -------------- --------
12,945 11,294 14,463
------------------------------- ------- ----------- -------------- --------
Non-current liabilities
Trade and other payables 6 1,506 1,699 1,252
Borrowings 1,838 2,846 2,342
Convertible loan notes 1,896 2,353 2,378
Deferred consideration - 427 143
Contingent consideration - 748 -
Deferred taxation liability 2,782 2,935 3,055
Provisions 40 - -
------------------------------- ------- ----------- -------------- --------
8,062 11,008 9,170
------------------------------- ------- ----------- -------------- --------
Total liabilities 21,007 22,302 23,633
------------------------------- ------- ----------- -------------- --------
Total equity and liabilities 42,304 38,609 42,142
------------------------------- ------- ----------- -------------- --------
Consolidated Statement of Changes in Equity
(Attributable to the owners of the Parent Company)
(Called (Share Equity Merger Translation (Accumulated (Total
up share premium Reserve reserve reserve loss) equity)
capital) account) (a) (b) (c)
(GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000)
(At 1 April 2017) (1,625) (16,995) (2,919) (7,966) (-) (13,996) (15,509)
(Profit for the period) (-) (-) (-) (-) (-) (626) (626)
(Other comprehensive
income) (-) (-) (-) (-) (29) (-) (29)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
(Total comprehensive
income) (-) (-) (-) (-) (29) (626) (655)
(Transactions with owners in their capacity as owners:)
(Share based payments) (-) (-) (-) (-) (-) (143) (143)
(Waiver of Opus loan
notes) (-) (-) (251) (-) (-) (251) (-)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
(At 30 September
2017) (1,625) (16,995) (2,668) (7,966) (29) (12,976) (16,307)
(Profit for the period) (-) (-) (-) (-) (-) (3,497) (3,497)
(Other comprehensive
income) (-) (-) (-) (-) (12) (-) (12)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
(Total comprehensive
income) (-) (-) (-) (-) (12) (3,497) (3,509)
(Transactions with owners in their capacity as owners:)
(Share based payments) (-) (-) (-) (-) (-) (341) (341)
(Waiver of Opus loan
notes) (-) (-) (141) (-) (-) (141) (-)
(Exercise of warrants) (3) (11) (-) (-) (-) (-) (14)
(Settlement of MXC
warrants) (-) (-) (-) (-) (-) (1,662) (1,662)
(Settlement of Equity
reserve) (-) (-) (2,276) (-) (-) (2,276) (-)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
(At 31 March 2018) (1,628) (17,006) (251) (7,966) (41) (8,383) (18,509)
(Profit for the period) (-) (-) (-) (-) (-) (544) (544)
(Other comprehensive
income) (-) (-) (-) (-) (20) (-) (20)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
(Total comprehensive
income) (-) (-) (-) (-) (20) (544) (564)
(IFRS 15 cumulative
adjustment*) (-) (-) (-) (-) (-) (257) (257)
(Transactions with owners in their capacity as owners:)
(Share based payments) (-) (-) (-) (-) (-) (603) (603)
Shares issued to
Brixx International
(d) (29) (1,157) (-) (-) (-) (-) (1,186)
Conversion of MXC
loan notes (e) (15) (617) (107) (-) (-) (107) (632)
Exercise of share
options (f) (5) (55) (-) (-) (-) (-) (60)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
(At 30 September
2018) (1,677) (18,835) (144) (7,966) (61) (7,386) (21,297)
-------------------------- -------- ---------- --------- --------- ------------ ------------- ---------
* Adoption of IFRS 15 from 1 April 2018 has required an adjustment to accumulated loss to reflect the cumulative effect of the change in policy. Further details are included in note 1 'Accounting Policies'.
(a) Equity reserve
The equity reserve consists of the equity component of convertible loan notes that were issued as part of the consideration for past acquisitions less the equity component of instruments converted or settled.
Consolidated Statement of Changes in Equity (cont.)
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.
The GBP144,000 balance at 30 September 2018 relates to the loan notes issued for the purchase of Kypera Holding Limited.
(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) Translation reserve
On consolidation, the balance sheets of Castleton Technology Pty Ltd (formerly Kypera Australia Pty Ltd) and Kinetic Information Systems Pty Ltd are translated into sterling at the rates of exchange ruling at the balance sheet date. Income statement Items and cash flows are translated into sterling at rates approximating to the foreign exchange rates at the date of the transaction. Exchange gains or losses arising from the consolidation of these two Australian companies are recognised in the translation reserve.
(d) Shares issued to Brixx International
During the period, the Company issued a total of 1,432,706 new ordinary shares of 2 pence each to Brixx International Limited at a price of 82.75 pence per ordinary share, in respect of; the acquisition of the exclusive, perpetual and assignable licence in relation to the Castleton Strategic Modelling (formerly "Brixx") platform ("the Asset Purchase"), further development of the platform and settlement of pre Asset Purchase licence fees payable.
The consideration for the Asset Purchase was GBP1,686,000, of which GBP1,186,000 was satisfied by the issue of new ordinary shares of 2 pence each and GBP500,000 was paid in cash on 2 July 2018. The cash element has been included in "Purchase of intangible assets" in the Consolidated Cash Flow Statement.
(e) Conversion of MXC Loan notes
On 9 August 2018, MXC Guernsey Limited, a wholly owned subsidiary of MXC Capital Limited ("MXC") served a conversion notice with respect to the remaining convertible loan notes ("CLNs") it held, together with the accrued interest, amounting to GBP632,000 in total.
The CLNs were converted at 85.6 pence per ordinary share of 2 pence each in the capital of the Company therefore 738,896 new ordinary shares of 2 pence were allotted to MXC on 17 August 2018.
(f) Exercise of share options
On 29 August 2018, Haywood Chapman, Chief Financial Officer, exercised 271,000 options over new ordinary shares of 2 pence each in the capital of the Company, at an exercise price of 22 pence per ordinary share.
Consolidated Cash Flow Statement
Unaudited Unaudited
six months six months Audited
ended 30 ended year ended
September 30 September 31 March
2018 2017 2018
Note GBP000 GBP000 GBP000
-------------------------------------- ----- ------------ -------------- ---------------------
Cash flows from operating activities
Cash generated from operations 7 3,027 2,331 5,177
Exceptional items (160) (395) (723)
Net finance charges paid (59) (64) (142)
Income taxes refunded/(paid) 118 54 (8)
-------------------------------------- ----- ------------ -------------- ---------------------
Net cash flows generated from
operating activities 2,926 1,926 4,304
-------------------------------------- ----- ------------ -------------- ---------------------
Cash flows from investing activities
Receipt of deferred consideration
from sale of businesses 33 31 63
Acquisition of businesses, net
of cash acquired (14) - (1,052)
Purchase of property, plant
and equipment (158) (230) (368)
Purchase of intangible assets (806) (340) (356)
Net cash flows used in investing
activities (945) (539) (1,713)
-------------------------------------- ----- ------------ -------------- ---------------------
Cash flows from financing activities
Exercise of share options and
warrants 60 - 14
Settlement of deferred consideration (300) (300) (850)
Settlement of MXC Scheme liability (1,662) - -
Repayment of borrowings (504) (1,030) (1,556)
Net cash flows used in financing
activities (2,406) (1,330) (2,392)
-------------------------------------- ----- ------------ -------------- ---------------------
Net (decrease)/increase in cash
and cash equivalents (425) 57 199
Foreign exchange effects 20 29 41
Cash and cash equivalents at
beginning of period 510 270 270
Cash and cash equivalents at
end of period 105 356 510
-------------------------------------- ----- ------------ -------------- ---------------------
Comprising:
Cash and cash equivalents 183 571 510
Overdrafts (78) (215) -
--------------------------------------------- ------------ -------------- -----------------------
105 356 510
--------------------------------------------- ------------ -------------- -----------------------
Notes to the half-yearly financial information
1. Basis of preparation and general information
The interim financial information is unaudited. This condensed consolidated interim financial information was approved by the Directors and authorised for issue on 6 November 2018.
The Company is a public limited liability company incorporated and domiciled in England. The address of its registered office is Castleton Technology plc ("Castleton"), 100 Fetter Lane, London, EC4A 1BN. The Company is listed on the AIM market of the London Stock Exchange.
The principal activity of the Group during the period was the provision of software and managed services to the public and not-for-profit sectors, predominantly the social housing sector.
Castleton and its subsidiaries have not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed companies, in the preparation of this half-yearly financial report.
This condensed, consolidated interim financial information for the six months ended 30 September 2018 does not comply, therefore with all the requirements of IAS 34, 'Interim financial reporting' as adopted by the European Union. The consolidated interim financial information should be read in conjunction with the annual financial statements of Castleton for the year ended 31 March 2018, which have been prepared in accordance with IFRS as adopted by the European Union.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2018 were approved by the Board of directors on 18 June 2018 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498 (2) or (3) of the Companies Act 2006.
Accounting policies
The accounting policies used in the preparation of the financial information for the six months ended 30 September 2018 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union. The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those set out in the Group's Annual Report for the year ended 31 March 2018, except as described below, and will be applied for the year ending 31 March 2019. This is the first set of financial statements where IFRS 15 has been applied and the Group has adopted IFRS 15 from 1 April 2018.
While the financial information included has been prepared in accordance with the recognition and measurement criteria of IFRS, as adopted by the European Union (EU), these financial statements do not contain sufficient information to comply with IFRSs.
Going concern
The consolidated interim financial information of Castleton has been prepared on the going concern basis.
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. 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 the consolidated financial information.
Revenue recognition
IFRS 15 (Revenue from customer contracts) is effective for the Group for the period starting 1 April 2018. The Group has applied IFRS 15 on a cumulative effect basis with practical expedients from the date of initial application (1 April 2018), without restatement of comparative amounts.
The company generates revenue from the provision of software licences, implementation services, maintenance and support, outsourced hosting managed services and sale of hardware. Products and services are sold in bundled packages and may include ad-hoc consultancy services for example to implement upgrades or to provide for further user licences during the contract period.
Software licences are provided on either a 'hosted' or 'installed' or basis and contracts typically include an initial contract term of more than one year and, thereafter renew on an annual basis.
Implementation services comprise 'go live' support which can include; design and build, data migration, training, configuration and implementation.
Hosted managed services contracts are multi-element contracts which may include hosted IT infrastructure, hosted desktop, data back-up, support services and provision of various software applications.
Revenue is recognised when the performance obligation has been satisfied by transferring the promised good or service to the customer.
At contract inception, the transaction price is determined, being the amount that the company expects to receive for transferring the promised goods or services. The transaction price is allocated to the performance obligations in the contract based on their relative standalone selling prices.
Software
Software comprises a licence to use the software, upgrades and support and maintenance. Management have concluded that the upgrades are fundamental to the functionality of the software and that therefore, there is a single performance obligation. Management have also determined that the licence granted to the customer provides them with the right to access the intellectual property as it exists, throughout the licence period, and consequently, where there is an obligation to provide the licence with upgrades over time, revenue from this single performance obligation is recognised on a straight line basis over the contract period. In instances where there are no ongoing obligations, the revenue would be recognised at a point in time.
Implementation services
Determination of whether implementation is a distinct performance obligation is based on the degree of complexity involved in the service, as judged by management. Where the service comprises basic changes and configuration to implement the software, it is regarded as distinct. Where the implementation requires significant configuration and modification of the underlying software, it is not considered to be distinct and is combined with other promises in the contract. The treatment of implementation services will be assessed on a contract by contract basis.
Managed services
Excluding implementation, which is assessed separately (see above), all remaining goods and services within managed services contracts are part of a series of goods and services that are substantially the same and have the same pattern of transfer to the customer. The revenue from all these services is recognised on a straight line basis over the contract period, which is the period over which the customer receives and consumes the benefits of goods and services.
Sales of hardware
Sales of hardware are recognised at the point that control of the hardware is transferred to the customer. This is usually on delivery.
Financing arrangements
Where a financing component exists in customer contracts, because of the payment profile of the implementation fee which is paid upfront but may be recognised over the period of the contract, the financing component of the fee is separated from the monthly revenue and recognised separately as interest.
Contract costs
The incremental costs associated with obtaining a contract are recognised as an asset if the company expects to recover the costs. Costs that are not incremental to a contract are expensed as incurred. Management determine which costs are incremental and meet the criteria for capitalisation.
Costs to fulfil a contract, which are not in the scope of another standard, are recognised separately as a contract fulfilment asset to the extent that they relate directly to a contract which can be specifically identified and the costs are expected to be recovered. Contract fulfilment assets are amortised over the expected contract period on a systematic basis representing the pattern in which the associated performance obligation is satisfied.
Costs to fulfil a contract, which do not meet the criteria above, are expensed as incurred.
The company undertakes an assessment, at each reporting date, to determine whether capitalised contract costs and contract fulfilment assets are impaired. An impairment loss is recognised if the carrying amount of the capitalised contract costs or contract fulfilment asset exceeds the remaining consideration expected to be received for the services to which the asset relates, less the costs that directly relate to providing the services under the contract.
Deferred and accrued income
Where the payment schedule within a customer contract does not match the transfer of goods and services, the company will recognise either accrued or deferred income.
A deferred income contract liability is recognised where payments made exceed the revenue recognised at the period end date. An accrued income contract asset is recognised where payments made are less than the revenue recognised at the period end date.
Quantitative impact of IFRS 15 adoption
The quantitative impact of IFRS 15 on the interim 2019 financial statements is;
-- A reduction in revenue of GBP0.1 million for the period ended 30 September 2018
-- A reduction in cost of sales and administrative expenses of GBP0.1 million in total, for the period ended 30 September 2018, resulting in no material change to operating profit
-- An increase in deferred income of GBP1.2 million at 30 September 2018, of which GBP0.6 million is current and GBP0.6 million is non-current
-- An increase in deferred costs of GBP1.0 million at 30 September 2018, of which GBP0.6 million is current and GBP0.4 million is non-current
The key reasons for these changes are:
-- Non distinct implementation services and associated contract fulfilment costs - under IFRS 15, implementation services that do not meet the criteria to be a distinct performance obligation will result in the fees associated with these services being combined with other promises in the contract and recognised over the contract term. Under previous accounting policies, implementation costs associated with the implementation of software were expensed to the income statement as incurred. Under IFRS 15, these costs will be capitalised as contract fulfilment assets and amortised over the life of the contract. The treatment of implementation services will be assessed on a contract by contract basis
-- Contract fulfilment costs - Under previous accounting policies costs (for example sales commissions, legal costs) associated with individual contracts were recognised when contracts were signed. Under IFRS 15, where they are incremental to obtaining the contract and are expected to be recovered, these costs are capitalised and amortised over the life of the contract.
Financial instruments
The adoption of IFRS 9 'Financial Instruments' with effect from 1 April 2018 has not had a material impact on the results of the Group.
2. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker ('CODM'). The CODM has been identified as the Executive Board.
The Group is comprised of the following main operating segments:
Managed Services This segment comprises the results of Castleton Managed Services Ltd for the six months ended 30 September 2018.
Software Solutions This segment comprises the results of Castleton Software Solutions Ltd, Castleton Australia Pty Limited and Kinetic Information Systems Pty Ltd for the six months ended 30 September 2018 (30 September 2017: Castleton Software Solutions Limited, Kypera Limited and Castleton Australia Pty Limited).
Six months ended 30 September 2018 - unaudited
Managed Software
Services Solutions Central Total
Continuing GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- ---------- --------- --------
Revenue 5,853 7,058 - 12,911
-------------------------------------------- --------- ---------- --------- --------
Operating profit/(loss) before amortisation
of acquired intangibles and management
charge 1,430 2,159 (1,406) 2,183
Amortisation of acquired intangibles (469) (1,079) (18) (1,566)
Management charge (388) (436) 824 -
-------------------------------------------- --------- ---------- --------- --------
Operating profit /(loss) 573 644 (600) 617 Finance income 6 1 1 8 Finance costs - (2) (126) (128) -------------------------------------------- --------- ---------- --------- -------- Profit/(loss) before tax 579 643 (725) 497 -------------------------------------------- --------- ---------- --------- -------- Adjusted EBITDA* 1,553 2,214 (798) 2,969 -------------------------------------------- --------- ---------- --------- -------- Assets and liabilities -------------------------------------------- --------- ---------- --------- -------- Segment assets 11,861 33,602 (3,159) 42,304 -------------------------------------------- --------- ---------- --------- -------- Segment liabilities (3,592) (11,988) (5,427) (21,007) -------------------------------------------- --------- ---------- --------- -------- Net assets / (liabilities) 8,269 21,614 (8,586) 21,297 -------------------------------------------- --------- ---------- --------- --------
*Earnings for the period from continuing operations before net finance costs, tax, depreciation, amortisation, exceptional items, group management charges and share based payment charges.
Six months ended 30 September 2017 - unaudited
Managed Software
Services Solutions Central Total
Continuing GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- ---------- --------- --------
Revenue 4,957 5,828 - 10,785
-------------------------------------------- --------- ---------- --------- --------
Operating profit/(loss) before amortisation
of acquired intangible and management
charge 1,464 985 (594) 1,855
Amortisation of acquired intangibles (484) (1,000) (18) (1,502)
Management charge (607) (204) 811 -
-------------------------------------------- --------- ---------- --------- --------
Operating profit /(loss) 373 (219) 199 353
Finance income 9 1 6 16
Finance costs - (25) (160) (185)
-------------------------------------------- --------- ---------- --------- --------
Profit/(loss) before tax 382 (243) 45 184
-------------------------------------------- --------- ---------- --------- --------
Adjusted EBITDA* 1,551 1,371 (662) 2,260
-------------------------------------------- --------- ---------- --------- --------
Assets and liabilities
-------------------------------------------- --------- ---------- --------- --------
Segment assets 11,427 29,384 (2,202) 38,609
-------------------------------------------- --------- ---------- --------- --------
Segment liabilities (2,933) (12,206) (7,163) (22,302)
-------------------------------------------- --------- ---------- --------- --------
Net assets / (liabilities) 8,494 17,178 (9,365) 16,307
-------------------------------------------- --------- ---------- --------- --------
*Earnings for the period from continuing operations before net finance costs, tax, depreciation, amortisation, exceptional items, group management charge and share based payment charges.
Revenue by products and services
Analysis of revenue by category is as follows:
Unaudited six months Unaudited six months
ended 30 September 2018 ended 30 September 2017 Audited year
ended 31
GBP000 GBP000 March 2018
GBP000
-------------------------------------------------- ------------------------ ------------------------ --------------
Recurring software, managed service revenues and
other revenues 8,213 7,427 15,381
Fees from professional services 2,650 1,842 4,445
Sale of hardware 2,048 1,516 3,453
-------------------------------------------------- ------------------------ ------------------------ --------------
Total revenue 12,911 10,785 23,279
-------------------------------------------------- ------------------------ ------------------------ --------------
3. Taxation
Tax on profit on ordinary activities
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------ ------------
Corporation Tax
Current tax on profit for the period 174 - 41
Adjustment in respect of prior
period - - (427)
Deferred tax
Origination and reversal of timing
differences (221) (442) (1,909)
Total tax credit (47) (442) (2,295)
-------------------------------------- ------------ ------------ ------------
The rate of UK corporation tax for the year beginning 1 April 2017 is 19%. From the year starting 1 April 2020 the UK corporation tax rate drops to 17%. Deferred tax has been measured on the basis of these rates and reflected in the financial statements.
4. Earnings per share
Basic earnings per share and diluted earnings per share are calculated using a weighted average number of shares of 79,946,725 and 83,927,452 respectively (30 September 2017: weighted average number of shares of 78,714,832 and 82,919,847 respectively and at 31 March 2018: weighted average number of shares of 78,714,832 and 82,474,239 respectively).
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
Basic earnings per share 0.68p 0.80p 5.23p
Fully diluted 0.65p 0.75p 5.00p
-------------------------- ------------ ------------ ------------
5. Trade and other receivables
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------- ------------ ------------ ------------
Current
Trade receivables 4,255 3,160 5,147
Less: provision for impairment of
trade receivables (236) (302) (223)
----------------------------------- ------------ ------------ ------------
Trade receivables - net 4,019 2,858 4,924
Other receivables* 1,716 913 806
Prepayments 848 756 655
----------------------------------- ------------ ------------ ------------
6,583 4,527 6,385
----------------------------------- ------------ ------------ ------------
Non-current
Trade receivables 39 111 97
Prepayments 105 - 23
Other receivables* 395 37 130
----------------------------------- ------------ ------------ ------------
539 148 250
----------------------------------- ------------ ------------ ------------
* Adoption of IFRS 15 from 1 April 2018 has resulted in an increase in current other receivables of GBP0.6 million and non-current other receivables of GBP0.4 million.
6. Trade and other payables
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------ ------------ ------------ ------------
Current
Trade payables 1,409 653 1,167
Other payables 282 100 305
Taxation and social security 1,057 502 772
Accruals 1,306 1,063 1,800
Income tax payable 43 - 113
Deferred income* 7,246 6,293 6,923
------------------------------ ------------ ------------ ------------
11,343 8,611 11,080
------------------------------ ------------ ------------ ------------
Non-current
Deferred income* 1,247 1,414 904
Accrued interest 259 285 438
------------------------------ ------------ ------------ ------------
1,506 1,699 1,252
------------------------------ ------------ ------------ ------------
* Adoption of IFRS 15 from 1 April 2018 has resulted in an increase in current deferred income of GBP0.6 million and non-current deferred income of GBP0.6 million.
7. Net cash flows from operating activities
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------ ------------
Profit on ordinary activities before
tax 497 184 1,828
Adjustments for:
Exceptional items - 133 (844)
Net finance costs 120 169 314
Depreciation of property, plant
and equipment 183 129 306
Amortisation of intangible assets 1,566 1,502 3,027
Equity-settled share based payment
charge 603 143 484
-------------------------------------- ------------ ------------ ------------
2,969 2,260 5,115
Movements in working capital:
Decrease/(increase) in trade and
other receivables 457 518 (1,183)
Increase in trade and other payables 184 332 1,955
Decrease in deferred income (568) (656) (553)
Decrease in provisions - (101) (135)
Increase in inventories (15) (22) (22)
-------------------------------------- ------------ ------------ ------------
58 71 62
-------------------------------------- ------------ ------------ ------------
Cash generated from operations
before exceptional items 3,027 2,331 5,177
-------------------------------------- ------------ ------------ ------------
Non-cash transactions
The principal non-cash transaction is the cumulative effect of adopting IFRS 15 which resulted in an increase to deferred income as at 30 September 2018 of GBP1.2 million and an increase in deferred costs (presented within Other receivables) of GBP1.0 million as at 30 September 2018.
8. Net debt
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------- ------------ ------------ ------------
Cash 183 571 510
Overdraft (78) (215) -
Barclays loan (2,750) (3,750) (3,250)
Mortgage (96) (104) (100)
------------------------------------- ------------ ------------ ------------
Net debt before loan notes and
deferred/contingent consideration (2,741) (3,498) (2,840)
Loan notes and accrued interest
on loan notes* (2,155) (2,638) (2,726)
------------------------------------- ------------ ------------ ------------
Net debt before deferred/contingent
consideration (4,896) (6,136) (5,566)
Deferred consideration (435) (1,144) (735)
Contingent consideration - (748) -
Net debt (5,331) (8,028) (6,301)
------------------------------------- ------------ ------------ ------------
* Accrued interest on loan notes is presented within "Accrued Interest" in Trade and other payables.
9. Subsequent events
On 23 October 2018, the Company completed a capital reduction process, which cancels the amount standing to the credit of the Company's share premium account under section 648 of the Company Act 2006. The purpose of the capital reduction is to create distributable reserves. This will facilitate the implementation of a progressive dividend policy for the current year.
Advisers
Nominated Adviser and Broker
FinnCap, 60 New Broad Street London, EC2M 1JJ
Auditors
RSM UK Audit LLP, St Philips Point, Temple Row, Birmingham, West Midlands, B2 5AF
Solicitors
Beachcroft LLP, 100 Fetter Lane, London, EC4A 1BN
Registrars
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
Principal Bankers
Barclays Bank plc, 1 Churchill Place, London, E14 5HP
Company Number
03336134
Further details can be found on the Castleton website at the following address: www.castletonplc.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR DGBDBIXGBGIU
(END) Dow Jones Newswires
November 06, 2018 02:00 ET (07:00 GMT)
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