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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kape Technologies Plc | LSE:KAPE | London | Ordinary Share | IM00BQ8NYV14 | ORD USD0.0001 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 285.00 | 279.00 | 285.00 | 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
TIDMKAPE
RNS Number : 6320B
Kape Technologies PLC
24 September 2018
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014
24 September 2018
Kape Technologies plc
("Kape," the "Company," or the "Group")
Interim results for the six months ended 30 June 2018
Kape (AIM: KAPE), the consumer security software business, today announces its unaudited half year results for the six months ended 30 June 2018.
Financial highlights
-- Revenue of $27.8 million (H1 2017: $30.1 million)
o Revenue from core activities up by 14.2% to $24.1m in H1 2018
-- Adjusted EBITDA(1) up 45.1% to $4.3 million (H1 2017: $2.9 million)
o Strong underlying growth in Adjusted EBITDA of 178%(2)
-- Adjusted cash from operations excluding the Web Apps and License of $2.1 million (H1 2017: $1.1 million) representing 90% underlying growth
-- Increase in Media and App Distribution combined segment results(3) to $13.1 million (H1 2017: $10.1 million)
-- Significant increase in Segment margins to 47.1% (H1 2017: 33.3%) and EBITDA margins to 15.3% (H1 2017: 9.7%)
-- Strong balance sheet with $62.7 million cash (31 December 2017: $69.5 million), after $6.8 million of dividend distribution in the period
Operational highlights
-- Achieved significant progress in developing the Group's SaaS revenue model
o Expect to deliver $18 million revenue from existing users in future periods
o Growth of 116% in premium subscribers to 561,400
o 40% of new Reimage sales sold on subscription
o Improvement in customer retention ratio from 69% to 74%
-- Launched CyberGhost 7.0 app and developed plug-ins for Chrome and Firefox browsers -- Post period-end, in July 2018:
o Acquired Intego, a leading Mac and iOS cyber security and malware SaaS business
o Divested the Company's non-core Media assets to Ecom Online Ltd, enabling management to focus solely on Kape's own Cybersecurity products
-- The board remains confident in delivering year-on-year growth in 2018, in-line with market expectations
Ido Erlichman, Chief Executive Officer of Kape, commented:
"I am delighted to report excellent progress was achieved in the first half of 2018, with a significant rise in subscriptions sales as well as growth in Adjusted EBITDA. Post the period-end, in July 2018, we acquired Intego, a highly complementary business that delivers against all our key growth priorities.
"We expect the momentum achieved in H1 to continue into the second half of the year, as we integrate Intego and begin to realise the synergies this acquisition presents, as well as continue to execute on organic growth initiatives and evaluating select acquisition opportunities. Kape is now in an excellent position to become a leading provider of online security and privacy in the growing consumer cybersecurity market. "
(1) Adjusted EBITDA is a non GAAP measure and a company specific measure which excludes other operating income and expenses which are considered to be one off and non-recurring in nature.
(2) The Adjusted EBITDA attributable to the Web Apps and License division for H1 2017 was $1.4 million. This division was discontinued as of September 2017; as such no revenue was recorded in H1 2018. Underlying Adjusted EBITDA from core activities, excluding the discontinued Web Apps and License division for H1 2018 is $4.3 million (H1 2017: $1.5 million)
(3) The segment result has been calculated using revenue less costs directly attributable to that segment.
Enquiries:
Kape Technologies plc via Vigo Communications Ido Erlichman, Chief Executive Officer Moran Laufer, Chief Financial Officer Shore Capital (Nominated Adviser & Broker) Toby Gibbs / James Thomas +44 (0)20 7408 4090 Vigo Communications (Financial Public Relations) Jeremy Garcia / Antonia Pollock kape@vigocomms.com +44 (0)20 7390 0237
Chief Executive Officer's review
Overview
Kape continued to make excellent operational progress in the first half of 2018, following a transformational 24 months. This is reflected in the strong performance achieved in the period, with Adjusted EBITDA(1) up 45% to $4.3 million (H1 2017: $2.9 million) and significant growth in underlying Adjusted EBITDA(1) of 178%.
I am delighted to report that significant progress has been achieved across all key growth drivers. What is particularly pleasing is our focus on transitioning to a SaaS-based business has led to a growth in our recurring revenue base and we expect to deliver $18 million revenue from existing users in future periods (Dec 2017: $8 million). This is a key metric for the Group, as it reflects on our customers' satisfaction, in addition to providing quality, highly visible earnings for the Company moving forward.
An important initiative for management has been to increase retention rates across our product mix at a time when we have significantly scaled-up our user acquisition efforts. This has been successful, and we are pleased to report that retention levels grew to 74% in H1 (H1 2017: 69%). In the first half of the year, we were able to grow the number of subscriptions by 116% to 561,400 premium subscriptions sold. This, coupled with an increasing contribution from CyberGhost's SaaS-based revenues, has resulted in significantly better revenue visibility. This will be further strengthened following the full integration of Intego, which is a pure SaaS solution.
Our progress has been underpinned by strong demand for our consumer cybersecurity products. This, coupled with our proprietary customer acquisition capabilities, allowed us to generate double digit growth in our privacy vertical in the first six months of the year. This performance highlights the quality of our digital marketing arm as well as our ability to integrate products.
An important initiative that supports our growth ambitions is our R&D efforts. We have expanded our existing R&D centres in Germany, Israel and Romania, and through the acquisition of Intego established new R&D centres in the US and Paris, enabling us to build on and enhance our global presence and access to talent:
-- to provide next generation infrastructure to support our growing customer base;
-- to develop new products, as well as add innovative features to our existing products, in order to provide our customers with the best in class online security; and
-- to further leverage cross company business intelligence and marketing tools, enabling Kape to reach our growing global customer base efficiently and at scale.
In the first half of the year, we launched the CyberGhost 7.0 app for iOS and Android. This new app focuses on increased accessibility for new customers and usability features, including a one-click activation button to immediately turn on and off privacy mode in seconds. Concurrently, Kape launched a CyberGhost Google Chrome and Mozilla Firefox plug-in. We are already seeing significant traction for CyberGhost 7.0 globally, demonstrating Kape's standing in the privacy market.
Post period-end
Our core focus on developing and acquiring B2C cybersecurity products has gathered significant momentum and culminated in the acquisition of Intego, a leading Mac and iOS cybersecurity and malware SaaS business, in July 2018.
The acquisition is directly in-line with Kape's core strategy and is a highly complementary fit to the Company's existing product suite. Intego provides the Group with a strong foothold in the malware protection and security solutions markets. It also brings over 150,000 paying users and we believe there is considerable potential to generate cross-selling opportunities across the newly combined customer-base. Finally, the newly enlarged group will enable Kape to expand into additional software solutions, supported by Intego's strong development skills and knowhow. Intego was acquired for a total consideration of $16.0 million cash, from internal cash resources. Intego's senior management team are under a two-year obligation period to the Company following completion of the acquisition.
Once Intego is fully integrated into the Group and is able to be marketed alongside our existing portfolio of products, we believe Kape's digital marketing expertise will accelerate both Intego's user acquisition strategy and foster greater levels of cross-selling opportunities. This, management believe, will lead to higher profit margins.
In July 2018, Kape announced the divestment of its non-core Media division to Ecom Online Ltd, signalling the completion of Kape's transformation into a cybersecurity company focusing on owned products.
As consideration, Kape will receive a 50% share of EBITDA from the Media division for the five years following the sale, which will be reinvested in Kape's core App Distribution segment, to which all Media division employees will be transferred.
Outlook
The Group remains keenly focused on three key drivers to underpin future growth, these are to:
-- continue to broaden the Group's cybersecurity product base;
-- further develop Kape's SaaS revenue model - migrating customers onto an annual subscription model; and
-- generate greater levels of cross-selling opportunities across Kape's global customer base.
As the integration of Intego continues to progress, we expect to capitalise on our digital marketing expertise to expand its existing user base, foster higher levels of cross sell opportunities, in addition to delivering operational synergies.
Across the business, we continue to experience strong organic growth and remain well positioned to accelerate this during the second half of the year, supported by expanding our existing customer base and enhancing our recurring revenue base. The board therefore remains confident in delivering year-on-year growth in 2018 and beyond, in-line with market expectations.
As already demonstrated, we expect to continue to evaluate and execute on select acquisition targets where we see strong product synergies or opportunities to extend our market reach.
Ido Erlichman
Chief Executive Officer
24 September 2018
Chief Financial Officer's review
Overview
Total reported revenues in the first half of 2018 decreased by 7.6% to $27.8 million (H1 2017: $30.1 million), however revenues of the core App Distribution segment were up 14.2% to $24.1 million in the first half of 2018 (H1 2017: $21.1 million). Segment results increased by 30.4% to $13.1 million (H1 2018: $10.0 million) driven mainly by the App Distribution segment result which increased by 71.1% to $11.5 million. Adjusted EBITDA increased by 45.1% to $4.3 million (H1 2017: $2.9 million), and excluding the discontinued Web apps and license segment, underlying EBITDA significantly increased by 178%.
Kape remains cash generative with $2.1 million of cash generated from operations after adjusting for one-off non-recurring items in the period (H1 2017: $2.6 million), which represents cash conversion of 49% (H1 2017: 90%). The decrease in cash conversion is attributable to the Company investing $3.4 million in subscription user acquisition (H1 2017: Nil) which is expected to have a positive impact on operational cash flow in future years. The Group's balance sheet remains strong with a cash balance of $62.7 million at 30 June 2018 (31 December 2017: $69.5 million) and no debt.
Segment Result
Hot Features
Premium
Revenue Segment result
H1 2018 H1 2017 H1 2018 H1 2017
$'000 $'000 $'000 $'000
App distribution 24,108 21,116 11,467 6,702
Media 3,715 7,343 1,616 1,692
Web Apps and License - 1,639 - 1,639
------- ------- ------- -------
27,823 30,098 13,083 10,033
======= ======= ======= =======
The Segment Results have been calculated using revenue less costs directly attributable to that segment. Cost of sales comprises commissions paid to publishers and payment processing fees. Direct sales and marketing costs comprise traffic acquisition costs.
App distribution H1 2018 H1 2017
$'000 $'000
Revenue 24,108 21,116
Cost of sales (2,812) (1,768)
Direct sales and marketing
costs (9,829) (12,646)
------- --------
Segment result 11,467 6,702
------- --------
Segment margin % 47.6 31.7
During the period, the App Distribution segment has seen continued growth with a significant increase in revenue of 14.2% to $24.1 million (H1 2017: $21.1 million) and 71.1% in segment result to $11.5 million (H1 2017: $6.7 million). The segment margin has significantly improved to 47.6% (H1 2017: 31.7%). The increase in segment result and margin was underpinned by a solid performance of Kape's core software solutions, and a bigger portion of revenue coming from subscriptions rather than licences.
Media H1 2018 H1 2017
$'000 $'000
Revenue 3,715 7,343
Direct sales and marketing
costs (2,099) (5,651)
------- -------
Segment result 1,616 1,692
------- -------
Segment margin % 43.5 23.1
Revenue from the Media segment decreased to $3.7 million, while the segment result remained stable in the period with a margin increase of 20.4%. The decrease in revenue is mainly attributed to the Company's programmatic video activity which suffered from a decrease in demand during the period. As a result, the Company decided to focus on the most profitable media campaigns, which resulted in the margin increase. On 26 July 2018, the Group sold the Media division, including its holdings in Clearvelvet Trading Limited, to Ecom Online Ltd.
Web Apps and License H1 2018 H1 2017
$'000 $'000
Revenue - 1,639
Cost of sales - -
Segment result - 1,639
------- -------
Segment margin % - 100
In accordance with the board's decision to cease investment in the Web Apps and License segment, which Kape reported in 2016, revenue in H1 2017 came solely from a software licence and services agreement between Kape and Playtech Software ("Playtech"), pursuant to the terms of which Kape granted Playtech a license to use certain software modules for Playtech's licensees' branded casino software. The agreement expired on 18 September 2017. Following the expiration of the license and services agreement, no further revenue was generated from this segment.
Adjusted EBITDA
Adjusted EBITDA for the six months to 30 June 2018 was $4.3 million (H1 2017: $2.9 million). Adjusted EBITDA is a non-GAAP company specific measure which is considered to be a key performance indicator for the Group's financial performance. It excludes other operating income, share based payment charges and expenses which are considered to be one-off and non-recurring in nature and are excluded from the following analysis:
H1 2018 H1 2017
$'000 $'000
Revenue 27,823 30,098
Cost of sales (2,812) (1,768)
Direct sales and marketing
costs (11,928) (18,297)
-------- --------
Segment result 13,083 10,033
-------- --------
Indirect sales and marketing
costs (3,239) (2,700)
Research and development
costs (939) (452)
Management, general and administrative
cost (4,652) (3,950)
-------- --------
Adjusted EBITDA 4,253 2,931
-------- --------
EBITDA margin % 15.3 9.7
-------- --------
Operating profit/ (loss)
A reconciliation of Adjusted EBITDA to operating loss is provided as follows:
H1 2018 H1 2017
$'000 $'000
Adjusted EBITDA 4,253 2,931
Employee share-based payment
charge (187) (619)
Exceptional and non-recurring
costs (721) (284)
Depreciation and amortisation (1,234) (2,919)
Other operation loss (43) -
Operating profit/ (loss) 2,068 (891)
------- -------
Exceptional and non-recurring costs in H1 2018 comprised non-recurring staff costs of $0.5 million (H1 2017: $0.1 million) mainly due to payments made to option holders in parallel to the special dividend paid in June, $0.1 million (H1 2017: $0.2 million) for professional services for acquisitions and rebranding expenses and $0.1 of onerous lease contract (H1 2017: Nil). The decrease in Employee share-based payment charge is due to the repurchase of the share-based option consideration from the founder of CyberGhost, which completed on 20 November 2017.
Profit/ (loss) before tax
Profit before tax was $1.7 million (H1 2017: loss of $0.9 million). Finance costs of $0.7 million comprise mainly of foreign exchange differences derived from the Company's subsidiaries. The finance costs are offset by $0.4 million interest income generated from short-term deposits.
Profit/ (loss) after tax
Profit after tax was $1.3 million (H1 2017: loss $1.1 million). The tax charge derives mainly from group subsidiaries' residual profits.
Cash flow
H1 2018 H1 2017
$'000 $'000
Cash flow from operations 1,365 2,142
Exceptional and non-recurring
costs 721 493
Adjusted cash flow from operations 2,086 2,635
------- -------
% of Adjusted EBITDA 49% 90%
======= =======
Excluding Web Apps and License
Segment - (1,482)
Adjusted Cash flow from operations
excluding Web Apps and License
segment 2,086 1,153
Excluding increase of contract 3,445 -
liabilities
Adjusted Cash flow from operations
excluding Web Apps and License
segment 5,531 1,153
------- -------
Cash flow from operations was $1.4 million (H1 2017: $2.1 million). Adjusted cash flow from operations after adding back one-off payments was $2.1 million (H1 2017: $2.6 million and $1.2 million excluding the Web apps and License segment). This represented a cash conversion of 49% of Adjusted EBITDA (H1 2017: 90%). The decrease in cash conversion is attributable to the Company investing $3.4 million in subscription user acquisition (H1 2017: Nil) which is expected to have a positive impact on operational cash flow in future years. Excluding the investment, adjusted operating cash flow amounts to $5.5 million, which represents a cash conversion of 130%.
Net tax payments in the period were $0.3 million (H1 2017: Tax refunds of $0.03 million).
Cash spent in the period on capital expenditure of $0.9 million (H1 2017: $1 million), comprises capitalised development costs, fixed asset purchases and intangible assets acquired.
Cash outflows from financing activities included $6.8 million (H1 2017: Nil) of dividend paid to the Company's shareholders and payment of $0.5 million (H1 2017: Nil) resulting from the repurchase of share-based consideration. Cash inflows from financing activities included $0.1 million (H1 2017: $0.3 million) of proceeds from the exercise of employee options.
As a result, net cash outflow from investing and financing activities was $8.1 million (H1 2017: $5.3 million).
Financial position
At 30 June 2018, the Group had cash of $62.7 million (31 December 2017: $69.5 million), net assets of $74.2 million (31 December 2017: $79.4 million) and is debt free. At 30 June 2018, trade receivables were $4.7 million (31 December 2017: $8.5 million) which represented 36 days outstanding (31 December 2017: 42 days).
Subsequent events
On 24 July 2018, the Group acquired the entire issued share capital of Neutral Holdings Ltd, trading as Intego ("Intego"), a company incorporated in United States of America, for total consideration of $16 million. Intego is a leading Mac and iOS cybersecurity and malware protection SaaS business, with a focus on provision of malware protection, firewall, anti-spam, backup, data protection and parental controls software for Mac.
On 26 July 2018, the Group sold its Media division, including its holdings in Clearvelvet Trading Limited, to Ecom Online Ltd. The Company will receive earn-out consideration of 50% of the Media division's EBITDA for the next five years following the sale. In the year ending 31 December 2017, the Media division generated revenues of $15.8 million, with Adjusted EBITDA of $0.2 million.
Moran Laufer
Chief Financial Officer
24 September 2018
Consolidated statement of comprehensive income
For the six months ended 30 June 2018
Note Six months Six months
ended 30 ended 30
June 2018 June 2017
(unaudited) (unaudited)
$'000 $'000
Revenue 3 27,823 30,098
Cost of sales (2,812) (1,768)
------------ ------------
Gross profit 25,011 28,330
Selling and marketing costs (15,402) (21,059)
Research and development costs (1,044) (506)
Management, general and administrative
costs (5,220) (4,737)
Depreciation and amortisation (1,234) (2,919)
Other operating loss (43) -
------------ ------------
Total operating costs 5 (22,943) (29,221)
Operating profit/ (loss) 5 2,068 (891)
Adjusted EBITDA (*) 5 4,253 2,931
------------ ------------
Employee share-based payment charge (187) (619)
Exceptional and non-recurring costs 5 (721) (284)
Depreciation and amortisation (1,234) (2,919)
Other operating loss 5 (43)
------------ ------------
Operating profit/ (loss) 5 2,068 (891)
--------------------------------------- ----- ------------ ------------
Share of results of equity accounted
associates - (40)
Profit on equity interest in associate - 52
Finance income 355 88
Finance costs (716) (158)
------------ ------------
Profit/ (loss) before taxation 1,707 (949)
Tax charge (444) (103)
------------ ------------
Profit/ (loss) for the period 1,263 (1,052)
Other comprehensive income:
Foreign exchange differences on
translation of foreign operations 84 572
------------ ------------
Total comprehensive profit/ (loss)
for the period 1,347 (480)
Profit/ (loss) attributable to:
Owners of the parent 1,209 (1,079)
Non-controlling interests 54 27
------------ ------------
Total comprehensive income/ (loss)
attributable to:
Owners of the parent 1,293 (507)
Non-controlling interests 54 27
------------ ------------
Basic profit/ (loss) per share (cents) 7 0.9 (0.7)
Diluted profit/ (loss) per share
(cents) 7 0.9 (0.7)
*Adjusted EBITDA is a non GAAP measure and a company specific measure which is earnings before interest, tax, depreciation, amortisation share based payment charges and exceptional and non-recurring costs.
Consolidated statement of financial position
As at 30 June 2018
30 June
2018 31 December
2017
(unaudited) (audited)
Note $'000 $'000
Non-current assets
Intangible assets 12,140 12,350
Property, plant and equipment 747 815
Non-current investment 50 50
Deferred contract costs 2,423 406
Deferred tax asset 43 97
15,403 13,718
------------- -----------
Current assets
Software licence inventory 147 65
Deferred contract costs 2,814 1,386
Trade and other receivables 7,372 11,071
Cash and cash equivalents 62,672 69,502
------------- -----------
73,005 82,024
------------- -----------
Total assets 88,408 95,742
============= ===========
Equity
Share capital 6 15 15
Additional paid in capital 130,776 130,728
Foreign exchange differences on translation
of foreign operations 936 852
Retained earnings (58,568) (53,200)
------------- -----------
Equity attributable to equity holders
of the parent 73,159 78,395
------------- -----------
Non-controlling interests 1,031 977
------------- -----------
Total equity 74,190 79,372
------------- -----------
Non-current liabilities
Contract liabilities 1,284 892
Deferred tax liabilities 310 349
Deferred consideration 571 993
------------- -----------
2,165 2,234
------------- -----------
Current liabilities
Trade and other payables 7,886 10,094
Contract liabilities 3,269 3,120
Deferred consideration 898 922
------------- -----------
12,053 14,136
------------- -----------
Total equity and liabilities 88,408 95,742
============= ===========
Consolidated statement of cash flows
For the six months ended 30 June 2018
Six months Six months
ended 30 June ended 30
2018 June 2017
(unaudited) (Unaudited)
$'000 $'000
Cash flow from operating activities
Profit/ (loss) for the period after
taxation 1,263 (1,052)
Adjustments for:
Amortisation of intangible assets 1,088 2,707
Depreciation of property, plant and
equipment 146 212
Loss on sale of property, plant and
equipment 40 -
Tax charge 444 103
Interest Income (352) (45)
Interest expenses 149 142
Share based payment charge 187 619
Share of results of associates - 40
Remeasurement gain on equity interest
in associate - (52)
Interest received 352 120
Unrealised foreign exchange differences 123 -
-------------- ------------
Operating cash flow before movement
in working capital 3,440 2,839
Decrease in trade and other receivables 3,663 241
Increase in software licences inventory (82) *(80)
Decrease in trade and other payables (2,307) (692)
Decrease in other current liabilities - (209)
Increase in deferred contract costs (3,427) -
Increase in contract liabilities 423 13
-------------- ------------
Cash flow from operations 1,710 2,112
Tax received/ (paid) net of refunds (345) 30
-------------- ------------
Cash generated from operations 1,365 2,142
Cash flow from investing activities
Purchases of property, plant and
equipment (99) (131)
Net cash paid on business combination - (4,645)
Intangible assets acquired (5) -
Advances to commercial partner - (260)
Capitalisation of development costs (772) (627)
-------------- ------------
Net cash used in investing activities (876) (5,663)
Cash flow from financing activities
Repurchase of share-based consideration (475) -
Exercise of options by employees 49 314
Dividend paid to company's shareholders (6,763) -
-------------- ------------
Net cash used in financing activities (7,189) 314
-------------- ------------
Net decrease in cash and cash equivalents (6,700) (3,207)
Revaluation of cash due to changes
in foreign exchange rates (130) (134)
Cash and cash equivalents at beginning
of year 69,502 72,064
-------------- ------------
Cash and cash equivalents at end
of year 62,672 68,723
============== ============
* Reclassified
Notes
1. General information
The financial information set out in this document is for Kape Technologies plc (the "Company") and its subsidiary undertakings (together the "Group") in respect of the six months ended 30 June 2018.
Kape distributes and develops digital products in the online security space. The Company utilises its proprietary digital distribution technology to optimise its reach and create a superb user experience. The Company offers products which provide online security, privacy and optimal online experience. Kape's vision is to provide and develop best-in-class digital products for its customers and partners globally.
The Board of Directors approved this interim financial information on 21 September 2018.
2. Basis of preparation
This interim consolidated financial information has been prepared using accounting policies based on International Financial Reporting Standards (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 31 December 2017 Annual Report. The financial information for the half years ended 30 June 2018 and 30 June 2017 does not constitute statutory accounts.
The annual financial statements of Kape Technologies Plc ('the group') are prepared in accordance with IFRS as adopted by the European Union. The comparative financial information for the year ended 31 December 2017 included within this report does not constitute the full statutory Annual Report for that period. The statutory Annual Report and Financial Statements for 2017 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 December 2017 was unqualified and did not draw attention to any matters by way of emphasis.
The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2017 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2018, and are adopted in the 2018 financial statements. IFRS 9 Financial Instruments were adopted in this interim financial information for the period ended 30 June. IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement, and has had an effect on the Group in the following areas:
-- The impairment provision on financial assets measured at amortised cost (such as trade and other receivables) have been calculated in accordance with IFRS9's expected credit loss model, which differs from the incurred loss model previously required by IAS 39. This has not resulted in a change to the impairment provision at 1 January 2018
Other new and amended standards and interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to have a material impact on the Group.
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to 31 December 2018 (the date on which the company's next annual financial statements will be prepared up to) that the Group has decided not to adopt on the interim report.
Effective March 31, 2018, the functional currency of one of the Company's subsidiaries, CyberGhost SRL, has changed to US dollar ("USD" or "$") from Romanian Lei ("Lei"). The change was following an assessment by company's management that found that the USD is the primary currency of the economic environment in which the subsidiary operates. The exchange rate at that date was Lei 1= $0.2646.
After making enquiries, the directors have concluded that the Group has adequate resources to continue operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated unaudited financial statements.
3. Revenue disaggregation of revenue
The following table presents our revenues disaggregated by the timing of revenue recognition in accordance with our reporting segments:
Six months ended 30 June Six months ended 30 June
2018 2017
(unaudited) (Unaudited)
$'000 $'000
App distribution Media Web apps Total App distribution Media Web apps Total
and license and license
----------------- ------ ------------- ------- ----------------- ------ ------------- -------
Revenue
recognised
over a
period 6,149 - - 6,149 1,937 - 1,639 3,576
----------------- ------ ------------- ------- ----------------- ------ ------------- -------
Revenue
recognised
at a point
in time 17,959 3,715 - 21,674 19,179 7,343 26,522
----------------- ------ ------------- ------- ----------------- ------ ------------- -------
Total 24,108 3,715 - 27,823 21,116 7,343 1,639 30,098
----------------- ------ ------------- ------- ----------------- ------ ------------- -------
4. Segmental information
Segment revenues and results
Based on the management reporting system, the Group operates three reportable segments:
-- App distribution - comprising the Group's own software and SaaS products and distribution platform;
-- Media - comprising the Group's ad network activities and associated technology platforms; and
-- Web Apps and License - comprising revenue generated from monetising web apps and licencing the associated technology
Six months ended 30 June App Media Web Apps Total
2018 Distribution and License
$'000 $'000 $'000 $'000
Revenue 24,108 3,715 - 27,823
Cost of sales (2,812) - - (2,812)
Direct sales and marketing
costs (9,829) (2,099) - (11,928)
-------------- -------- -------------- ---------
Segment result 11,467 1,616 - 13,083
Central operating costs (8,830)
Adjusted EBITDA (note 5) 4,253
Depreciation and amortisation (1,234)
Employee share-based payment
charge (187)
Other Operation Loss (43)
Exceptional and non-recurring
costs (721)
---------
Operating profit 2,068
Finance income 355
Finance costs (716)
---------
Profit before tax 1,707
Taxation (444)
---------
Profit after taxation 1,263
---------
Six months ended 30 June 2017 App Media Web Apps Total
Distribution and License
$'000 $'000 $'000 $'000
Revenue 21,116 7,343 1,639 30,098
Cost of sales (1,768) - - (1,768)
Direct sales and marketing
costs (12,646) (5,651) - (18,297)
-------------- -------- -------------- ---------
Segment result 6,702 1,692 1,639 10,033
Central operating costs (7,102)
Adjusted EBITDA (note 5) 2,931
Depreciation and amortisation (2,919)
Employee share-based payment
charge (619)
Exceptional and non-recurring
costs (284)
---------
Operating loss (891)
Share of results of associates (40)
Capital gain from Conversion
of previously recognized associate 52
Finance costs (70)
---------
Loss before tax (949)
Taxation (103)
---------
Loss after taxation (1,052)
---------
5. Operating Profit / (loss)
Adjusted EBITDA
Adjusted EBITDA is calculated as follows:
Six months Six months
ended 30 ended 30
June 2018 June 2017
$'000 $'000
Operating profit/ (loss) 2,068 (891)
Depreciation and amortisation 1,234 2,919
Employee share-based payment
charge 187 619
Other operating loss 43
Exceptional and non-recurring
costs:
Non-recurring staff and exceptional
costs 721 284
Adjusted EBITDA 4,253 2,931
Excluding Web Apps and License
Segment - (1,401)
Adjusted EBITDA excluding Web
Apps and License segment 4,253 1,530
---------- ----------
Operating costs
Operating costs are further analysed as follows:
Six months Six months Six months Six months
ended 30 ended 30 ended 30 ended 30
June 2018 June 2018 June 2017 June 2017
Adjusted Total Adjusted Total
$'000 $'000 $'000 $'000
Direct sales and marketing
costs 11,928 11,928 18,297 18,297
Indirect sales and marketing
costs 3,239 3,474 2,700 2,732
---------- ---------- ---------- ----------
Selling and marketing costs 15,167 15,402 20,997 21,059
--------------------------------------- ---------- ---------- ---------- ----------
Research and development
costs 939 1,044 452 506
Management, general and administrative
cost 4,652 5,220 3,950 4,737
Depreciation and amortisation 455 1,234 761 2,919
Other operating loss - 43 - -
---------- ---------- ---------- ----------
Total operating costs 21,213 22,943 26,160 29,221
========== ========== ========== ==========
Adjusted operating costs exclude share based payment charges, exceptional and non-recurring costs, amortisation of acquired intangible assets and other operation loss which resulted disposal of fixed assets.
6. Shareholder's equity
Ordinary share capital as at 30 June 2018 amounted to $14,850 (30 June 2017: $14,164; 31 December 2017: $14,850).
The number of shares in issue as at 30 June 2018 was 148,496,073 (30 June 2017: 148,496,073; 31 December 2017: 148,496,073).
As at 30 June 2018, the Company held in the treasury a total of 6,561,685 of ordinary shares of $0.0001 per value (30 June 2017: 6,867,397; 31 December 2017: 6,650,248). During the six months ended 30 June 2018, 88,563 of ordinary shares of $0.0001 per value were transferred out of treasury to satisfy the exercise of options by the Company employees (30 June 2017: 584,026).
On March 13 2018, the Company's board of directors declared a special dividend of 3.55 pence per share, amounting to $6,763. The special dividend was paid on 13 June 2018 to those shareholders on the Company's register as at the record date of 25 May 2018.
7. Profit per share
Basic profit (loss) per share is calculated by dividing the profit (loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Six months Six months
ended 30 ended 30
June 2018 June 2017
Cent Cent
Basic and diluted 0.9 (0.7)
Adjusted basic and diluted 2.0 1.3
Adjusted earnings per share is a non-GAAP measure and therefore the approach may differ between companies. Adjusted earnings have been calculated as follows:
Six months Six months
ended 30 ended 30
June 2018 June 2017
$'000 $'000
Profit/(Loss) for the period 1,263 (1,052)
Post tax adjustments:
Employee share-based payment
charge 187 626
Exceptional and non-recurring
costs 662 269
Amortisation on acquired
intangible assets 774 1,987
Adjusted profit for the year 2,886 1,830
========== ==========
Number Number
Denominator - basic:
Weighted average number of
equity shares for the purpose
of earnings per share 141,869,089 141,322,155
Denominator - diluted
Weighted average number of
equity shares for the purpose
of diluted earnings per share 142,216,068 141,992,883
The diluted denominator has not been used where this has anti-dilutive effect. Basic and diluted loss per share are therefore the same for reporting purposes.
The difference between weighted average number of Ordinary shares used for basic earnings per share and the diluted earnings per share is 346,979 (H1 2017: 670,728) being the effect of all potentially dilutive Ordinary shares derived from the number of share options granted to employees.
8. Related party transactions
The Group is controlled by Unikmind Holdings Limited incorporated in British Virgin Islands, which owns 73% of the Company's shares. Mr. Teddy Sagi is the sole ultimate beneficiary of the Unikmind Holdings Limited.
During the period the following transactions were carried out with related parties:
Six months Six months
ended 30 ended 30
June 2018 June 2017
$'000 $'000
Revenue from common controlled company 86 1,770
Technical support services to end customers
provided by common controlled company (1,880) (1,184)
Payment processing services provided by
common controlled company (170) (23)
Office rent expenses to common controlled
companies (291) (68)
Revenue from equity investment - 36
(2,255) 531
========== ==========
9. Subsequent events
(a) Acquisition of Neutral Holdings Ltd ("Intego")
On 24 July 2018 the Group acquired the entire issued share capital of Neutral Holdings Ltd trading as Intego ("Intego"), a company incorporated in United States of America, for total consideration of $16 million. Intego is a leading Mac and iOS cybersecurity and malware protection SaaS business, with a focus on the provision of malware protection, firewall, anti-spam, backup, data protection and parental controls software for Mac. The acquisition is directly in-line with Kape's core strategy to accelerate its growth in the cybersecurity market through selected acquisitions and brings significant strategic benefits to the company.
The detailed acquisition accounting is in progress and yet to be complete. It is anticipated that the acquisition will be accounted for in full in the annual financial statements for the period ending 31 December 2018.
(b) Sale of the Media division
On 26 July 2018, the Group sold the Media division, including the entire share capital of Clearvelvet Trading Limited, to Ecom Online Ltd. The Company will receive a deferred consideration of 50% of the Media division's EBITDA to be paid on a quarterly basis over the next five years following the closing. In the year ending 31 December 2017, the Media division generated revenues of $15.8 million, with Adjusted EBITDA of $0.2 million.
The detailed disposal accounting is in progress and yet to be complete. It is anticipated that the sale will be accounted for in full in the annual financial statements for the period ending 31 December 2018.
10. Cautionary statement
This document contains certain forward-looking statements relating to Kape Technologies plc ('the Group'). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Group to differ materially from those contained in any forward-looking statement. These statements are made by the directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
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 FKNDBCBKDPCB
(END) Dow Jones Newswires
September 24, 2018 02:01 ET (06:01 GMT)
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