ENABLES IT GROUP PLC - Interim Results

8 June 2015

Enables IT Group Plc

(“Enables IT”, “the Company” or “the Group”)

Unaudited interim results for the six months ended 31 March 2015

Enables IT, a leading provider of cloud computing, managed and professional services, is pleased to announce its interim results for the six months ended 31 March 2015.

Highlights:

• Revenue for the six months at £2.8 million (H1 2014: £3.6m)
• Recurring revenue 67.7% (H1 2014 54%)
• Gross profit at £0.93 million (H1 2014: £1.04m)
• Operating loss before exceptional items of £456k (H1 2014: loss £478k)
• Cash at bank of £417,000 as at 31 March 2015

Commenting on the results, Michael Walliss, CEO of Enables IT said:

“Whilst overall revenues were down, I am encouraged that recurring revenue levels increased as a proportion of total revenue during the period. However, growing the business from a low base continues to be a challenge. It is taking us longer than expected to secure solid growth and we have taken a number of steps which we hope will result in improved performance over time.”

FURTHER ENQUIRIES

Enables IT Group plc
Michael Walliss	Tel: [phone]
Cairn Financial Advisers LLP(Nominated Adviser and Broker)
Tony Rawlinson/ Emma Earl	Tel: [phone]
Redleaf Polhill Limited
David Ison / Rebecca Sanders-Hewitt	Tel: [phone]

CEO Statement:

Overview

We continue to improve our efficiency in managing work for customers and have been pleased with the levels of customer renewals during the period. Initiatives in managing our group operations have already resulted in cost savings, both in cost of sales as a percentage of revenue, and operating expenditure. However, whilst we had anticipated a period of stabilisation, further reorganisation has been required due to performance in some areas not meeting targets.

Trading

Revenue in the period under review was down compared to the same period to the 31 March 2014 due to delays in existing customers commencing projects and a general downturn in the amount of project work we were able to secure. Acquisition of new clients has been slower than expected which has hindered our growth expectations. The bulk of the losses arose in our European division, whilst the US made a small loss. During this period we have made investments into sales and marketing which have yet to deliver the expected returns, especially in respect of new business in the UK.

As announced in March this year, we have a loan facility in place to draw upon and we anticipate utilising this facility during the second half of the year, to assist in managing our working capital requirements.

Outlook

We have put in place a number of steps which we hope will lead to improved performance in the second half of the year.  However, at this stage it is too early to predict the outcome and we will make further announcements as the situation unfolds.

Michael Walliss

CEO

Consolidated Income Statement

For the six months ended 31 March 2015

	6 months to 31 March 2015 (unaudited)		6 months to 31 March 2014 (unaudited)		Year to 30 September 2014 (audited)
	£’000		£’000		£’000
Revenue – Continuing operations	2,755		3,578		7,035
	2,755		3,578		7,035
Cost of sales	(1,825)		(2,540)		(4,521)
Gross profit	930		1,038		2,514
Operating expenses	(1,386)		(1,516)		(3,116)
Operating loss before exceptional items	(456)		(478)		(602)
Exceptional items
Restructuring and redundancy costs	(85)		(201)		(164)
Impairment and amortisation of intangible assets	(120)		(175)		(1,409)
Foreign exchange gain on inter company balances	157		-		-
Operating loss	(504)		(854)		(2,175)
Finance costs	-		(4)		(6)
Loss before taxation	(504)		(858)		(2,181)
Taxation	17		40		69
Loss for the period	(487)		(818)		(2,112)
			-		-
Loss per share (pence)
Basic and Diluted	(1.79)p		(3.30)p		(8.35)p

Consolidated Balance sheet

As at 31 March 2015

	As at 31 March 2015 (unaudited)		As at 31 March 2014 (unaudited)		As at 30 September 2014 (audited)
Assets	£’000		£’000		£’000
Non-current assets
Tangible fixed assets	775		868		813
Intangible assets	360		656		481
Goodwill	900		1,997		900
	2,035		3,521		2,194
Current assets
Inventories	21		-		21
Trade and other receivables	713		1,728		1,264
Cash and cash equivalents	417		682		624
	1,151		2,410		1,909
Total Assets	3,186		5,931		4,103
Liabilities
Current liabilities
Trade and other payables	767		1,134		997
Deferred income	545		699		479
Loans and other borrowings	-		30		12
Corporation tax	(20)		41		(20)
Obligations under finance leases  - due within one year	-		8		-
Deferred consideration	-		425		-
	1,292		2,337		1,468
Non current liabilities
Deferred income	43		42		159
Deferred tax	55		161		73
	98		203		232
Total liabilities	1,390		2,540		1,700
Total assets less liabilities	1,796		3,391		2,403
Equity
Share capital	3,183		3,171		3,183
Share premium	8,757		8,465		8’757
Merger reserve	1,002		1,002		1,002
Reverse acquisition reserve	(8,977)		(8,977)		(8,977)
Other reserves	(232)		861		(112)
Retained earnings	(1,937)		(1,131)		(1,450)
Total equity	1,796		3,391		2,403

Consolidated Cash Flow Statement

For the six months ended 31 March 2015

	6 months to 31 March 2015 (unaudited) £’000		6 months to 31 March 2014 (unaudited) £’000		Year to 30 September 2014 (audited) £’000
Cash inflow from operating activities
Loss from operations	(504)		(858)		(2,181)
Adjustments for:
Interest paid	-		4		-
Depreciation	113		106		225
Impairment of intangible assets	32		109		1,259
Amortisation of intangible assets	88		66		150
Loss on disposal of fixed assets	-		-		1
Currency exchange adjustment	(304)		(2)		(3)
	(575)		(575)		(549)
(Increase) in inventories	-		-		(21)
Decrease)/(Increase) in receivables	550		(834)		(380)
(Decrease)/Increase in liabilities	(122)		287		55
Cash used in operations	(147)		(1,122)		(895)
Interest paid	-		(4)		-
Tax paid	-		(11)		(66)
Net cash used in operating activities	(147)		(1,137)		(961)
Cash flows from investing activities
Acquisition of subsidiaries	-		(9)		(434)
Purchase of goodwill and assets of business	-		(334)		(653)
Purchase of customer lists	-		(244)		(244)
Proceeds from disposal of fixed assets	-		-		2
Purchases of property, plant and equipment	(48)		(240)		(325)
Net cash used in investing activities	(48)		(827)		(1,654)
Cash flows from financing activities
Proceeds from issue of share capital	-		68		88
Premium on issue	-		2,392		2,991
Costs relating to share issues	-		(225)		(225)
Decrease in borrowings	(12)		(17)		(34)
Finance lease principle payments	-		(12)		(21)
Net cash generated from financing activities	(12)		2,206		2,799
Net (decrease)/increase in cash and cash equivalents	(207)		242		184
Cash and cash equivalents at beginning of period	624		440		440
Cash and cash equivalents at end of period	417		682		624

Consolidated Statement of changes in equity

For the six months ended 31 March 2015

	Share Capital £’000	Share Premium £’000	Retained Earnings £’000	Merger Reserve £’000	Reverse Acquisi-tion Reserve £’000		Other Reserves £’000		Total £’000
As at 1 October 2012 (as restated)	2	-	(9)	-	-	-		(7)
Loss and total comprehensive loss for the year	-	-	(304)	-	-	-		(304)
Shares issued by legal parent prior to reverse acquisition	2,950	5,129	-	-	-	-		8,079
Legal parent reserves prior to reverse acquisition	-	-	-	-	-	898		898
Currency exchange adjustment	-	-	-	-	-	2		2
Shares issued by the legal parent on reverse acquisition	119	-	-	1,002	-	-		1,121
Shares issued	26	934	-	-	-	-		960
Share issue expenses	-	(72)	-	-	-	-		(72)
Repayment of convertible loan notes	-	-	-	-	-	(39)		(39)
Reverse acquisition adjustment	(2)	-	-		(8,977)	-		(8,979)
Share based payment charge	-	-	-	-	-	2		2
As at 30 September 2013	3,095	5,991	(313)	1,002	(8,977)	863		1,661
Loss and total comprehensive loss for the period	-	-	(818)	-	-	-		(818)
Movement in the period	-	-	-	-	-	(2)		(2)
Shares issued during the period	76	2,699	-	-	-	-		2,775
Share issue expenses	-	(225)	-	-	-	-		(225)
As at 31 March 2014	3,171	8,465	(1,131)	1,002	(8,977)	861		3,391

 

	£’000	£’000	£’000	£’000	£’000		£’000	£’000
Year ended 30 September 2014
As at 1 October 2013	3,095	5,991	(313)	1,002	(8,977)	863			1,661
Loss and total comprehensive loss for the year	-	-	(2,112)	-	-	-			(2,112)
Shares issued	88	2,991	-	-	-	-			3,079
Share issue expenses	-	(225)	-	-	-	-			(225)
Transfer of reserves	-	-	975	-	-	(975)			-
As at 30 September 2014	3,183	8,757	(1,450)	1,002	(8,977)	(112)			2,403
Loss and total comprehensive loss for the period	-	-	(487)	-	-	-			(487)
Foreign currency exchange movement in the period	-	-	-	-	-	(120)			(120)
As at 31 March 2015	3,183	8,757	(1,937)	1,002	(8,977)	(232)			1,796

Notes to the Interim Results

1. General information and basis of preparation

The financial information set out in these condensed consolidated interim financial statements for the six months ended 31 March 2015 and the comparative figures for the six months ended 31 March 2014 are unaudited.  They have been prepared taking into account the requirements of IAS 34 Interim Financial Reporting and the AIM Rules.  They do not contain all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2014, which have been prepared in accordance with IFRS as adopted by the European Union.

The financial information for the year ended 30 September 2014 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 30 September 2014 have been filed with the Registrar of Companies.  The Auditor's Report in respect of those financial statements was unqualified and did not contain statements under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements are presented in Sterling, which is also the functional currency of the parent company.

Enables IT Group plc is the Group's ultimate parent company.  The Company is a Public Limited Company incorporated and domiciled in the United Kingdom.  Its registered office and principal place of business is Unit 5, Mole Business Park, Randalls Road, Leatherhead, Surrey KT22 7BA.  Its shares are listed on the Alternative Investment Market.

The condensed consolidated interim financial statements have been approved for issue by the Board of Directors on 5 June 2015.

2. Significant accounting policies

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 30 September 2014.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

3. Principal risks and uncertainties

The management of the business and the execution of the Group’s strategy are subject to a number of risks. The key business risks affecting the Group are set out below.

Dependence on major customers

Dependence on key suppliers

Competition

Technology

These risks are unchanged from those reported in the group’s 2014 Annual Report and further details may be found on page four of that report.

4. Segmental information

The services the group provides are in regard to one activity. Accordingly the primary segmental disclosure is based on geographical location.

	Europe	US	Eliminations	Continuing and consolidated operations
	£’000	£’000	£’000	£’000
6 months ended 31 March 2015
Segmental revenue – continuing	1,664	1,091	-	2,755
Segmental operating result	(361)	(95)	-	(456)
Restructuring and redundancy costs				(85)
Impairment and amortisation of intangible assets				(120)
Foreign exchange gain on inter company				157
Taxation				17
Loss for the six months				(487)
Year ended 30 September 2014
Segmental revenue – continuing	4,806	2,229	-	7,035
Segmental operating result	(440)	(162)	-	(602)
Restructuring and redundancy costs				(164)
Impairment and amortisation of intangible assets				(1,409)
Finance costs				(6)
Taxation				69
Loss for the year				(2,112)
6 months ended 31 March 2014
Segmental revenue – continuing	2,479	1,099	-	3,578
Segmental operating result	(492)	14	-	(478)
Restructuring and redundancy costs				(201)
Impairment and amortisation of intangible assets				(175)
Finance costs				(4)
Taxation				40
Loss for the six months				(818)

5. Goodwill and intangible assets

Goodwill					6 months to 31 March 2015 (unaudited) £’000	6 months to 31 March 2014 (unaudited) £’000	Year to 30 September 2014 (audited) £’000
Cost
Opening balance					1,965	1,390	1,390
Additions					-	607	654
Adjustment due to reduced final consideration					-	-	(79)
Closing balance					1,965	1,997	1,965
Impairment
Opening balance					(1,065)	-	-
Impairment charge					-	-	(1,065)
Closing balance					(1,065)	-	(1,065)
Net book value					900	1,997	900

Goodwill and other intangibles relate to the reverse acquisition of Enables IT Limited, the acquisition of The Support Force Group Limited and the acquisition of the business and assets of Know Technology LLC.

Impairment testing has been performed over the total balance of intangible assets which were allocated to the one cash generating unit (CGU) of the Group, that of the sale of IT managed services and technologies. The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.

The carrying value of intangible assets and goodwill has been assessed for impairment by reference to the value in use. Value in use was determined by discounting the future cash flows generated from the continuing use of the unit.

An impairment charge of £32,395 was recognised at 31 March 2015 (£109,000 at 31 March 2014) against the carrying value of certain customers at Enables IT (UK) Ltd and Enables IT Inc. which were considered to have no future value to the business.

Amortisation and impairment charges are recorded within exceptional items.

6. Loss per share

The loss per share is based on the net loss for the period attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding during the period.

The basic loss per share has been calculated by dividing the retained loss for the period of £487,288 (2014: loss of £817,991) by the weighted average number of ordinary shares of 27,284,303 (2014: 24,771,764) in issue during the period.

7. Dividends

No dividend is proposed for the six months ended 31 March 2015.

8. Copies of Interim Results

Copies of the Interim Results will be available on the Enables IT website, Investor Section - www.enablesit.com

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