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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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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 |
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0 | 0 | N/A | 0 |
TIDMCROS
RNS Number : 3418Z
Crossrider plc
14 March 2017
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014
14 March 2017
Crossrider plc
("Crossrider" or the "Company")
Final results for the year ended 31 December 2016
Crossrider (AIM: CROS), the online distribution and digital product company, announces its final results for the year ended 31 December 2016.
Financial highlights
-- Revenue of $56.5 million (2015: $84.6 million). Decrease is primarily due to the expected decline and decision to cease investment in the web apps platform
-- Adjusted EBITDA(1) of $6.4 million (2015: $10.1 million) -- Increase in adjusted cash from operations(1) to $7.9 million (2015: $6.9 million) -- Cash conversion from Adjusted EBITDA of 123 per cent (2015: 69 per cent)
-- Increase in Media and App Distribution combined segment(2) results to $14.7 million (2015: $12.9 million)
-- Increase in Media and App Distribution combined segment margins to 28.3 per cent (2015: 22.4 per cent)
-- Strong balance sheet with $72.1 million cash (2015: $71.3 million) and no debt
Operational highlights
-- Strengthened the Board, with appointments of Ido Erlichman as Chief Executive Officer and Moran Laufer as Chief Financial Officer
-- Completed restructuring of the business: - Delivered $2.0 million of annualised savings - Established two core business segments: App Distribution and Media
-- Acquired DriverAgent, a leading device driver repair software and service, which is now fully integrated into the Group
-- Investment in organic growth opportunities gaining traction: - Grew and strengthened our digital App Distribution platform
- Expanded geographical footprint in the Media division into South East Asia, Middle East & Africa
Post period end
The Company announced separately today the acquisition of CyberGhost, a leading cyber security SaaS provider with a focus on the provision of Virtual Private Network ("VPN") solutions. CyberGhost's solution focuses on safeguarding personal information when browsing the Internet through unsecured mobile hotspots. The acquisition is for an initial consideration of EUR3.2 million, the issue of EUR3.0 million options over ordinary shares exercisable at nominal value and an EBITDA based earn-out payment capped at EUR3.0 million
Ido Erlichman, Chief Executive Officer of Crossrider, commented:
"Having joined Crossrider in May, I'm delighted to report significant progress across our business and that we are on track in the execution of our strategic plan. We have refocused Crossrider's core operating activities and are now well positioned to grow a world-class digital distribution platform both organically and through our stated acquisition ambitions.
"We have made a strong start to 2017 and are delighted to have today announced the acquisition of CyberGhost, a leading cyber security provider which is in line with our strategy to broaden our service offering into additional verticals. Through continued acquisitions, organic growth and the integration of CyberGhost, we look forward to continuing to drive profitability and long term growth for the Group."
(1) EBITDA, Adjusted EBITDA and Adjusted cash flow from operations are non GAAP measures. Adjusted EBITDA and adjusted cash flow from operations are company specific measures which exclude certain expenses which are considered to be one off and non-recurring in nature.
(2) The segment result has been calculated using revenue less costs directly attributable to that segment
Enquiries
Crossrider plc via Vigo Communications Ido Erlichman, Chief Executive Officer Moran Laufer, Chief Financial Officer Shore Capital (Nominated Adviser & Broker) +44 (0)20 3772 Bidhi Bhoma / Toby Gibbs 2496 Vigo Communications (Financial Public Relations) Jeremy Garcia / Fiona Henson / Antonia Pollock +44 (0)20 7830 crossrider@vigocomms.com 9700
About Crossrider
Crossrider is an online distribution and digital product company. The Company utilises its proprietary marketing technology platforms to prospect, optimise and monetise mobile and web media, to create a superb user experience. The Company offers improved retention and re-engagement rates, greatly enhancing the value of user activity. Crossrider provides its platforms to its customers for use with their products as well as developing and expanding its own product portfolio. Crossrider's vision is to provide and develop best-in-class digital products for its users globally.
Chairman's statement
2016 has been a year of both change and progress for Crossrider. In June, we commenced a major restructuring to streamline our business and simplify our reporting structure going forward. The Company's restructuring has resulted in achieving significant cost reductions and enabled us to pursue a new strategic direction, focussed on expanding our digital distribution platform.
Strengthening the board
In May of this year, Crossrider announced the appointment of Ido Erlichman as CEO. Ido's appointment has been pivotal in reshaping our business, as we transition from a pure adtech business to a leading software and digital distribution platform.
Ido has in-depth understanding of the market in which we operate and brings significant experience in the technology sector garnered through roles in private equity, consulting and finance and past experience in his previous CEO role with turning around Visual DNA.
Additionally, Crossrider has appointed Moran Laufer as CFO. Moran has been a key member of the finance team since 2012 and successfully supported the Group's admission to AIM.
In the short space of seven months, our management team has already been able to implement significant strategic change and we believe it is a very exciting time in the Company's transformation.
New strategic direction
The strategic overhaul of Crossrider has resulted in stable growth in our areas of focus - the App Distribution Division and the Media Division. Since the beginning of 2016 we have been winding down our operations in the web apps vertical and management is now solely focused on our two core divisions.
Crossrider anticipated a decline in the web app sector due to changes in the market environment. As a result, the Company shifted its focus away from the web apps sector in the period, including the browser extension platform, which has been outsourced through a licensing agreement since January 2016. We expect the year to 31 December 2017 to be the last year of reporting for this segment.
Foundation for growth
Crossrider continues to capitalise on opportunities consistent with our strategic vision and is confident in the Company's ability to accelerate the growth trajectory of its digital distribution platform, particularly through acquisitions.
The Company's expansion in this sector started successfully with the acquisition of DriverAgent in October. Crossrider has now completed the integration of DriverAgent and anticipates its contribution to revenue and earnings to materialise in the coming year. Importantly, this acquisition has proven the efficacy of our platform. The Board expects to deliver further growth in this division through larger synergistic acquisitions in the coming year.
We now feel we have a solid foundation in place from which we can drive future growth and continue to strengthen and expand the business.
The significant progress made by the Group in the course of the year would not have been possible without the talented and dedicated Crossrider team who continue to be key in executing on our strategic plan.
Don Elgie
Non-executive Chairman
13 March 2017
Chief Executive Officer's review
2016 has been a transformational year for Crossrider, during which the Company has successfully executed a three step strategic plan to reposition the business as a leading software and digital distribution platform.
Having restructured the business, the Board believes the Company is now ideally placed to capitalise on opportunities to grow organically through investment in our in-house capabilities and through selective acquisitions. The Group's reshaped operations are focussed on combining our strong digital media capabilities with our growing digital product platform, with a particular emphasis on serving the cyber security arena.
In the course of the year, management's primary challenge was to restructure and strengthen the Company's core operations and we are pleased to report that we have been able to achieve $2.0m in annualised savings as a result of this process and, in addition, establish two core business divisions - App Distribution and Media.
Secondly, management was focused on achieving organic growth in these core divisions and we are delighted that our App Distribution segment has achieved 20% growth in the period while our Media division has remained stable.
The third component of our strategy was to lay the foundations for future expansion through bolt-on and strategic acquisitions, building on our existing and refined business model. We have successfully executed on this, announcing in October the highly synergistic acquisition of DriverAgent, a leading device driver search and update service, and we continue to actively assess acquisition opportunities in 2017.
We have also taken further steps to strengthen our cash generative activities, improving working capital discipline whilst still providing quality service to all of our customers and partners, which has resulted in an increase in the cash generated from operations.
All of the initiatives that have been implemented are in support of our strategic decision to expand our existing digital distribution platform and extend our product offering, particularly in the cyber security space.
App Distribution
App distribution product hub, generating revenues from end users purchasing digital products online
In the app distribution division we are now offering two main products, Reimage computer repair software and service and the DriverAgent driver repair software and service. We have 720,000 paying subscribers around the world. Our top three markets are the US, UK & Germany.
In the last year we have strengthened our platform so it now provides an unrivalled and enhanced customer experience and lifetime value, further improving our customer service metrics. We believe that this provides us with a competitive advantage in the marketplace and a strong foundation from which to expand both our product offering and geographic reach.
In addition, we now have better control over our distribution, as we have initiated the process of bringing customer service in house, which allows us to improve the quality of our processes. We have also bolstered our in-house media buying capabilities enabling us to diversify our media sources, resulting in increased traffic volume, quality and market share. We expect these changes to extend customer lifetime value, enable margin consolidation and improve customer retention, thereby increasing profitability.
In October, we announced the acquisition of DriverAgent, which is designed for use with desktop computers, tablets and mobile devices, to identify out-dated drivers. This acquisition was highly complementary to our existing App Distribution hub and is now fully integrated into the Group.
The DriverAgent acquisition demonstrates our progress in successfully expanding our portfolio through our digital product hub and we continue to look to expand this vertical, predominantly through acquisition and third-party strategic partnerships.
Media
Marketing technology platforms and ad agency activities, generating revenue through agreements with media partners
In the Media division we work with companies primarily in Europe and provide them with end-to-end media and advertising technologies services. These include media buying and ad agency technologies and services, ad-serving technologies as well as programmatic video buying capabilities.
In our Media division we have expanded our foothold in the evolving media and advertising space by leveraging our strong mobile capabilities. We have successfully entered new markets and broadened our current offering into the native, social and content distribution channels.
We continue to develop our advertising technologies and supporting tools to address the constantly evolving marketplace and ensure we optimise our technologies for our media buying services. This is all consistent with our Company-wide strategy to maintain best in class online distribution funnels for our digital products.
Current trading and outlook
This year we have made significant progress in the turnaround of the business, reducing our cost base and realigning our strategic priorities. We believe these significant changes have repositioned the Company, enabling us to complete the turnaround and grow our core divisions in the medium term. The full impact of the turnaround and subsequent benefits will be realised in the coming year.
In 2017, whilst we will continue to drive organic growth opportunities, we will also focus on strategic acquisitions designed to broaden our exposure to SaaS revenues, mainly in the cyber security vertical. We are currently exploring the viability of a number of companies, evaluating them along the following criteria:
-- Sizable and growing user base -- Recurring revenue sales model -- Strong technological team
-- Ability to deliver strong synergies with both the Group's media capabilities and digital distribution platform
We have made a strong start to 2017 and continue to drive profitability and long term future growth for the Group.
Chief Financial Officer's review
Overview
Revenue in the year to 31 December 2016 decreased to $56.5 million (2015: $84.6 million) and Adjusted EBITDA to $6.4 million (2015: $10.1 million). The decrease is attributable to the Board's decision to cease investment in the web apps platform and outsource its monetisation to a third party. Excluding the web apps segment, revenue at $52.0 million is lower in comparison to $57.6 million in 2015. However, segment results have significantly increased, at $14.7 million (2015: $12.9 million) and margins have also increased at 28.3 per cent (2015: 22.4 per cent).
Crossrider remains a highly cash generative business, with an increase of $1 million in cash generated from operations after adjusting for one-off non-recurring items of $7.9 million (2015: $6.9 million). This represents adjusted cash conversion of 123 per cent compared to 69 per cent in 2015. The Group balance sheet remains strong with cash of $72.1 million at 31 December 2016 (31 December 2015 $71.3 million) and no debt.
During the period, the Group went through a major restructuring, resulting in changes to its management reporting system and now operates three reportable segments:
-- App distribution - comprising the Group's desktop app distribution platform;
-- Media - comprising the Group's Marketing technology platforms and ad network activities; and
-- Web apps and license - comprising revenue generated from licensing the web apps monetisation platform and associated technology.
Consequently, the previous period segmental results have been restated. The results of these segments are set out below.
Segment Result
Revenue Segment result Restated Restated 2016 2015 2016 2015 $'000 $'000 $'000 $'000 App distribution 38,241 37,229 11,267 9,414 Media 13,783 20,426 3,480 3,499 Web apps and License 4,508 26,980 4,508 13,611 ------ -------- ------ -------- Revenue 56,532 84,635 19,255 26,524 ====== ======== ====== ========
The segment result has 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 2016 2015 $'000 $'000 Revenue 38,241 37,229 Cost of sales (2,360) (1,854) Direct sales and marketing costs (24,614) (25,961) -------- -------- Segment result 11,267 9,414 -------- -------- Segment margin (%) 29.5 25.3
During the period, App Distribution improved in margins significantly, reaching 29.5 per cent compared to 25.3 per cent in the comparable period, resulting in a $1.9 million increase in the segment result. This represents a 20 per cent uplift. The margin improvement is attributable to two main drivers: improved media buying efficiency resulting in better traffic quality as well as user targeting and secondly, an improvement in customer retention and up selling to existing customers.
In October 2016, Crossrider completed the acquisition of Driver Agent, a driver repair and update software product for a consideration of $1.2m.
Media 2016 2015 $'000 $'000 Revenue 13,783 20,426 Direct sales and marketing costs (10,303) (16,927) -------- -------- Segment result 3,480 3,499 -------- -------- Segment margin % 25.25 17.13
In the Media division, revenues have decreased by 32.5 per cent and segment results have remained stable compared to 2015. The decrease in revenues is attributable to two low margin contracts with high working capital requirements that were signed in the fourth quarter of 2015 and terminated in 2016 to improve cash flow and decrease risk. If these contracts were to be excluded the segment results would have shown an increase of circa 11.9 per cent from a base of $3.1 million in 2015. This increase is attributable to an expansion in new territories and verticals, mainly mobile app distribution.
Web apps and license 2016 2015 $'000 $'000 Revenue 4,508 26,980 Cost of sales - (5,534) Direct sales and marketing costs - (7,835) ----- ------- Segment result 4,508 13,611 ----- ------- Segment margin % 100 50.45
At the beginning of 2016, the board decided to outsource the monetisation of its web apps platform to a third party. In light of this shift in this part of the Group's business model the Group ceased its media acquisition in this segment. Revenue in the period is comprised of consideration for license of the platform and its associated technology. The year to 31 December 2017 is expected to be the last year of reporting for this segment as the technology license contracts are expiring on September 2017.
Adjusted EBITDA
Adjusted EBITDA for year to 31 December 2016 was $6.4 million (2015: $10.1 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 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
2016 2015 $'000 $'000 Revenue 56,532 84,635 Cost of sales (2,360) (7,388) Direct sales and marketing costs (34,917) (50,723) -------- -------- Segment result 19,255 26,524 -------- -------- Indirect sales and marketing costs (4,265) (3,016) Research and development costs (1,299) (2,539) Management, general and administrative cost (7,278) (10,905) -------- -------- Adjusted EBITDA 6,413 10,064 -------- --------
Operating loss
A reconciliation of Adjusted EBITDA to operating loss is provided as follows:
2016 2015 $'000 $'000 Adjusted EBITDA 6,413 10,064 Employee share-based payment charge (716) (3,407) Exceptional and non-recurring costs (862) (1,957) Depreciation and amortisation (9,884) (9,370) Impairment of intangible assets (4,683) (9,132) ------- -------- Operating loss (9,732) (13,802) ------- --------
Exceptional and non-recurring costs in FY2016 comprised non-recurring staff restructuring costs of $0.6 million and a $0.3 million one-time onerous contract written off in the period. The decrease in the Employee share-based payment charge is due to reversal of charges from previous periods for employees that left the Company during the year.
Impairment of intangible assets
The intangible assets related to the acquisition of the Definiti ad-network in 2014 are allocated to the Group's Media segment and are considered to be separate cash generating unit ("CGU's") for the purpose of assessing carrying values. Following regulatory changes in the mobile subscription vertical in which Definiti operates, management now forecasts modest growth in advertising volumes from the Definiti ad-network over the coming years. The carried value of the intangible assets of Definiti ad-network CGU have therefore been re-assessed resulting in a goodwill impairment of $4.7 million being recognised in the year (2015: $nil)
Loss before tax
Loss before tax was $10.0 million (2015: $14.7 million).
Loss after tax
Loss after tax was $10.7 million (2015: $17.6 million). The tax charge derives mainly from Group subsidiaries residual profits. The Group continues to recognise a deferred tax asset of $0.2m (2015: $0.7m) in respect of tax losses accumulated in previous years.
Cash flow
2016 2015 $'000 $'000 Cash flow from operations 5,922 5,910 Exceptional and non-recurring costs 1,951 995 Adjusted cash flow from operations 7,873 6,905 ----- ----- % of Adjusted EBITDA 123% 69% ----- -----
Cash flow from operations was strong at $7.9 million (2015: $5.9 million). Adjusted cash flows from operations after adding back acquisition payments treated as remuneration and payments that are one off in nature, was $7.9 million this represents an improvement in cash conversion to 123 per cent of adjusted EBITDA from 69 per cent in 2015.
Tax paid in the period was $0.9 million (2015: $1.8 million).
Cash spent in the period on capital expenditure of $0.8 million (2015: $1.8 million) mainly comprises of capitalised development costs and purchase of fixed assets. Cash payments in respect of previous acquisitions totalled $1.4 million (2015: $1.4 million). The Company paid $0.9 million (2015: $0.1 million) in respect of the acquisition of the DriverAgent software business. As a result, net cash outflow from investing activities was $3.0 million (2015: $3.2 million).
The share buy-back programme, announced in November 2015, was completed in January 2016, returning $1.0 million to shareholders in 2016 (2015: $5.1 million).
Financial position
At 31 December 2016, the Group had cash of $72.1 million (31 December 2015: $71.3 million), had net assets of $80.5 million (31 December 2015: $ 91.5million) and is debt free. At 31 December 2016 trade receivables were $5.6 million (31 December 2015: $13.0 million) which represented 44 days outstanding, (31 December 2015: 52 days).
Directors' responsibility statement
We confirm to the best of our knowledge:
1. The Group financial statements, prepared in accordance with IFRSs as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and
2. The business review, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties they face.
The Directors of Crossrider plc are listed in the Group's Annual Report and Accounts for the year ended 31 December 2016. A list of current directors is maintained on Crossrider's website, www.crossrider.com.
By order of the Board,
Ido Erlichman Moran Laufer Chief Executive Officer Chief Financial Officer 13 March 2017 13 March 2017
Consolidated statement of comprehensive income
For the year ended 31 December 2016
2016 2015 Note $'000 $'000 Revenue 2 56,532 84,635 Cost of sales (2,360) (7,388) -------- -------- Gross profit 54,172 77,247 Selling and marketing costs (39,915) (54,146) Research and development costs (1,661) (3,500) Management, general and administrative costs (7,761) (14,901) Depreciation and amortisation (9,884) (9,370) Impairment of intangible assets 10 (4,683) (9,132) -------- -------- Total operating costs (63,904) (91,049) Operating loss 3 (9,732) (13,802) Adjusted EBITDA 6,413 10,064 -------- -------- Employee share-based payment charge 6 (716) (3,407) Exceptional and non-recurring costs 3 (862) (1,957) Depreciation and amortisation (9,884) (9,370) Impairment of intangible assets 10 (4,683) (9,132) -------- -------- Operating loss 3 (9,732) (13,802) ------------------------------ ---- -------- -------- Share of results of equity accounted associates 47 (38) Finance income 4 15 Finance costs (332) (870) -------- -------- Loss before taxation (10,013) (14,695) Exceptional tax charge 4 - (2,200) Tax charge 4 (665) (702) -------- -------- Loss for the year (10,678) (17,597) Other comprehensive income: Foreign exchange differences on translation of foreign operations - 1 -------- -------- Total comprehensive income for the year (10,678) (17,596) ======== ======== Basic earnings per share (cents) 7 (7.6) (11.9) Diluted earnings per share (cents) 7 (7.6) (11.9) -------- --------
Consolidated statement of financial position
As at 31 December 2016
2016 2015 Note $'000 $'000 Non-current assets Intangible assets 10 7,113 19,254 Property, plant and equipment 591 1,003 Investments in equity accounted associates 859 812 Deferred tax asset 4 166 716 8,729 21,785 -------- -------- Current assets Trade and other receivables 7,950 16,280 Cash and cash equivalents 72,064 71,336 80,014 87,616 Total assets 88,743 109,401 ======== ======== Equity Share capital 5 14 14 Additional paid in capital 130,292 131,287 Retained earnings (49,753) (39,791) Equity attributable to equity holders of the parent 80,553 91,510
-------- -------- Non-current liabilities Deferred tax liabilities 4 691 986 Deferred consideration 8 160 184 851 1,170 -------- -------- Current liabilities Trade and other payables 7,096 15,316 Deferred consideration 8 243 1,405 7,339 16,721 -------- -------- Total equity and liabilities 88,743 109,401 ======== ========
The financial statements were approved by the Board and authorised for issue on 13 March 2017.
Ido Erlichman Moran Laufer Chief Executive Officer Chief Financial Officer
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share Additional Retained Total capital paid in earnings capital $'000 $'000 $'000 $'000 At 1 January 2015 15 136,399 (25,602) 110,812 Loss for the year - - (17,597) (17,597) Other comprehensive income: Foreign exchange differences on translation of foreign operations - - 1 1 -------- ---------- --------- ---------- Total comprehensive income for the year - - (17,596) (17,596) Transactions with owners: Share based payments - - 3,407 3,407 Exercise of employee options (note 5) - 18 - 18 Purchase of own shares (note 5) (1) (5,130) - (5,131) -------- ---------- --------- ---------- At 31 December 2015 14 131,287 (39,791) 91,510 ======== ========== ========= ========== At 1 January 2016 14 131,287 (39,791) 91,510 ======== ========== ========= ========== Loss for the year - - (10,678) (10,678) Other comprehensive income: Foreign exchange - - - - differences on translation of foreign operations -------- ---------- --------- ---------- Total comprehensive income for the year - - (10,678) (10,678) Transactions with owners: Share based payments - - 716 716 Purchase of own shares (note 5) - (995) - (995) -------- ---------- --------- ---------- At 31 December 2016 14 130,292 (49,753) 80,553 ======== ========== ========= ==========
Consolidated statement of cash flows
For the year ended 31 December 2016
2016 2015 Note $'000 $'000 Cash flow from operating activities Loss for the year after taxation (10,678) (17,597) Adjustments for: Amortisation of intangible assets 10 9,421 8,974 Impairment of intangible assets 10 4,683 9,132 Depreciation of property, plant and equipment 463 396 Loss on sale of property, plant and equipment 35 - Tax charge 4 665 2,902 Interest income (4) (15) Interest expenses 51 210 Share based payment charge 6 716 3,407 Share of results of associates (47) 38 Unrealised foreign exchange differences 4 660 Operating cash flow before movement in working capital 5,309 8,107 Decrease/(Increase) in trade and other receivables 8,327 (2,529) Decrease in trade and other payables (6,625) (631) (Decrease)/Increase in other current liabilities (1,089) 963 -------- -------- Cash flow from operations 5,922 5,910 Tax paid net of refunds (904) (1,826) -------- -------- Cash generated from operations 5,018 4,084 Cash flow from investing activities Purchases of property, plant and equipment (108) (220) Sale of property, plant and equipment 24 - Net cash paid on business combination 8 (1,089) (902) Intangible assets acquired (850) - Net cash paid on Investment in associates (350) (500) Capitalisation of development costs 10 (744) (1,593) -------- -------- Net cash used in investing activities (3,117) (3,215) Cash flow from financing activities Net payment for purchase of own shares 5 (995) (5,131) -------- -------- Net cash generated from financing activities (995) (5,131) -------- -------- Net (decrease)/increase in cash and cash equivalents 906 (4,262) Revaluation of cash due to changes in foreign exchange rates (178) (443) Cash and cash equivalents at beginning of year 71,336 76,041 -------- -------- Cash and cash equivalents at end of year 72,064 71,336 ======== ======== 1. General information
The financial information provided is for Crossrider plc ("the Company") and its subsidiary undertakings (together the "Group") in respect of the financial years ended 31 December 2016 and 2015.
Crossrider is an online distribution and digital product company. The Company utilises its proprietary marketing technology platforms to prospect, optimise and monetise mobile and web media, to create a superb user experience. The Company offers improved retention and re-engagement rates, greatly enhancing the value of user activity. Crossrider provides its platforms to its customers for use with their products as well as developing and expanding its own product portfolio.
Basis of preparation
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group have adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the financial statements.
The financial information set out in this document does not constitute the Group's statutory financial statements for the year ended 31 December 2016 or 31 December 2015. The annual report and financial statements for the year ended 31 December 2016 were approved by the Board of Directors on 13 March 2017 along with this preliminary announcement. The financial statements for the year ended 31 December 2016 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for 2016 was unqualified and did not draw attention to any matters by way of emphasis.
The financial information set out in these preliminary results has been prepared using International Financial Reporting Standards (IFRSs) as adopted by the EU. The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2015. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2016. New standards, amendments and interpretations to existing standards, which have been adopted by the Group, have not been listed since they have no material impact on the financial statements.
2. Segmental information
Segment revenues and results
During the period a major restructuring has been undertaken, resulting in changes to the Group's management reporting. The change in reporting provides a more accurate and transparent description of activities. The Group now operates three reportable segments:
-- App distribution - comprising the Group's app 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
Consequently, the prior year segmental results have been restated.
App distribution Media Web apps Total 2016 2016 and license 2016 2016 $'000 $'000 $'000 $'000 Revenue 38,241 13,783 4,508 56,532 Cost of sales (2,360) - - (2,360) Direct sales and marketing costs (24,614) (10,303) - (34,917) ---------------- -------- ------------ -------- Segment result 11,267 3,480 4,508 19,255 Central operating costs (12,842) -------- Adjusted EBITDA(1) 6,413 Depreciation and amortisation (9,884) Impairment of intangible assets (4,683) Employee share-based payment charge (716) Exceptional and non-recurring costs (862) -------- Operating loss (9,732) Share of results of associates 47 Finance income 4 Finance costs (332) -------- Loss before tax (10,013) Taxation (665) -------- Loss after taxation (10,678)
Exceptional and non-recurring costs in 2016 comprised non-recurring staff restructuring costs of $0.6 million and a $0.3 million one-time onerous contract written off in the period. The decrease in the Employee share-based payment charge is due to reversal of charges from previous periods for employees that left the Company during the year.
The impairment of intangible assets charge of $4,683,000 relates to the Media segment. After allocating this charge to the Media segment, segment result is $1,203,000, loss.
App distribution Media Web apps Total 2015 2015 and license 2015 2015 $'000 $'000 $'000 $'000 Revenue 37,229 20,426 26,980 84,635 Cost of sales (1,854) 0 (5,534) (7,388) Direct sales and marketing costs (25,961) (16,927) (7,835) (50,723) ---------------- -------- ------------ -------- Segment result 9,414 3,499 13,611 26,524 Central operating costs (16,460) -------- Adjusted EBITDA(1) 10,064 Depreciation and amortisation (9,370) Impairment of intangible assets (9,132) Employee share-based payment charge (3,407) Exceptional and non-recurring costs (1,957) Operating loss (13,802) Share of results of associates (38) Finance income 15 Finance costs (870) -------- Loss before tax (14,695) Taxation (2,902) -------- Loss after taxation (17,597) --------
Exceptional and non-recurring costs in 2015 comprise non-recurring staff costs of $0.1 million and payments of contingent consideration treated as remuneration in respect of the Ajillion and Definiti Media acquisitions expensed through the income statement of $1.9 million.
The impairment of intangible assets charge of $9,132,000 relates to the Web apps and license segment. After allocating this charge to the Web apps and license segment, segment result is $4,479,000.
(1) Adjusted EBITDA is a company specific measure which is calculated as operating loss before depreciation, amortisation, exceptional and non-recurring costs, employee share-based payment charges and impairment of intangible assets which are considered to be one off and non-recurring in nature as set out in note 3. The Directors believe that this provides a better understanding of the underlying trading performance of the business.
Information about major customers
In 2016 and 2015 there were no customers contributing more than 10% of total revenue of the Group.
Geographical analysis of revenue
Revenue by origin
2016 2015 $'000 $'000 Europe 17,297 3,641 British Virgin Islands 27,520 68,300 Asia 11,715 12,694 ------ ------ 56,532 84,635 ====== ======
Geographical analysis of non-current assets
2016 2015 $'000 $'000 Europe 3,990 10,245 British Virgin Islands - 87 Asia 3,714 9,925 ----- ------ Total intangible assets and property, plant and equipment 7,704 20,257 ===== ====== 3. Operating loss
Operating loss has been arrived at after charging:
2016 2015 $'000 $'000 Exceptional and non-recurring costs Non-recurring staff costs 562 95 Onerous contract 300 - Expensed contingent payments arising from business combinations (note 8) - 1,862 ----- ----- 862 1,957 ----- ----- Auditor's remuneration: Audit 147 97 Other services 21 20 Amortisation of intangible assets 9,421 8,974 Depreciation 463 396 Impairment of intangible assets (note 10) 4,683 9,132 Employee share-based payment charge (note 6) 716 3,407 Rent payable under operating leases 459 294 ===== =====
Operating costs
Operating costs are further analysed as follows:
2016 2016 2015 2015 Adjusted Total Adjusted Total $'000 $'000 $'000 $'000 Direct sales and marketing costs 34,917 34,917 50,722 50,722 Indirect sales and marketing costs 4,265 4,998 3,016 3,424 --------- ------- --------- -------- Selling and marketing costs 39,182 39,915 53,738 54,146 -------------------------- --------- ------- --------- -------- Research and development costs 1,299 1,661 2,539 3,500 Management, general and administrative cost 7,278 7,761 10,906 14,901 Depreciation and amortisation 1,379 9,884 1,048 9,370 Impairment of intangible assets - 4,683 - 9,132 --------- ------- --------- -------- Total operating costs 49,138 63,904 68,231 91,049 ========= ======= ========= ========
Adjusted operating costs exclude share based payment charges, exceptional and non-recurring costs, amortisation of acquired intangible assets and impairment of intangible assets.
4. Taxation
The parent company is domiciled, for tax purposes, in both the Isle of Man and the UK. The final tax charge shown below arises partially from the difference in tax rates applied in the difference jurisdictions in which the subsidiaries' jurisdictions.
The tax charge in the year 2015 of $2,902,000 includes an exceptional tax charge of $2,200,000 arising as a result of the change in previously established corporation tax guidance in Israel relating to tax positions taken in respect of the 2013 and 2014 financial years. Of the $2,200,000 charge $1,200,000 has been agreed and settled in relation to profits generated in Israel in 2013, which have subsequently been deemed to be taxable as a result of revised OECD guidance and application. The remaining $1,000,000 has arisen from a retrospective change to the cost plus transfer pricing methodology (which was established and ratified by Israeli case law in 2015) on share option charges incurred by subsidiaries in Israel in 2014. The Group continues to recognise a deferred tax asset of $166,000 (2015: $716,000) in respect of tax losses accumulated in previous years.
The total tax charge can be reconciled to the overall tax charge as follows:
2016 2015 $'000 $'000 Loss before taxation (10,013) (14,695) -------- -------- Tax at the applicable tax rate of 20% (2015: 20%) (2,003) (2,939) Tax effect of Differences in overseas rates 976 2,233 Exceptional tax charge - 2,200 Expenses not deductible for tax purposes 1,327 1,408 Deferred tax not recognised on losses carried forward 440 - Tax expense for previous years (75) - Tax charge for the year 665 2,902 ======== ======== Analysed as: Deferred taxation in respect of the current year 263 (463) Current tax charge 402 3,365 -------- -------- Tax charge for the year 665 2,902 ======== ========
The group has maximum corporation tax losses carried forward at each period end as set out below:
2016 2015 $'000 $'000 Corporate tax losses carried forward 28,320 19,322 ====== ======
Details of the deferred tax asset recognised (arising in respect of losses) is set out below:
2016 2015 $'000 $'000 At the beginning of the year 716 567 (Derecognised)/Recognised in the year (558) 166 Foreign exchange revaluation 8 (17) ----- ----- At the end of the year 166 716 ===== =====
Details of the deferred tax liability recognised (arising from timing differences on intangible valuations on business combinations) is set out below:
2016 2015 $'000 $'000 At the beginning of the year 986 1,283 Movement in the year due to temporary differences (295) (297) ----- ----- At the end of the year 691 986 ===== =====
In addition, the Group has an unrecognised deferred tax asset in respect of the following:
2016 2015 $'000 $'000 Tax losses carried forward 28,047 10,729 ====== ====== 5. Shareholder's equity 2016 2015 Number Number of Shares of Shares Issued and paid up ordinary shares of $0.0001 148,496,073 148,496,073
The issued share capital of the Company on incorporation was 10,000 ordinary share of $1.00 par value.
During the year a total of nil of new ordinary shares of $0.0001 par value were issued for cash in relation to share option schemes resulting in cash consideration of $nil (2015: $18,000).
During the year a total of 1,250,000 of ordinary shares of $0.0001 par value were purchased by the Company for a total cash consideration of $994,952 and are held in treasury at the reporting date (2015: $5,130,920).
As for 31 December 2016, the Company hold in the treasury total of 7,451,423 of ordinary shares of $0.0001 per value (2015: 6,201,423).
The following describes the nature and purpose of each reserve within owner's equity:
Reserve Description and purpose Additional paid Share premium (i.e. amount subscribed in capital or share capital in excess of nominal value) Retained earnings Cumulative net gains and losses recognised in the consolidated statement of comprehensive income 6. Employee share based payments
Options have been granted under the Group's share option scheme to subscribe for ordinary shares of the Company. At 31 December 2016, the following options were outstanding (2015: 14,481,158):
Group Grant date Number of shares under option Subscription price per share Group 2 29 May 2014 1,182,790 $0.449 Group 3 29 May 2014 2,413,819 $0.538 Group 7 30 September 2014 854,940 $1.662 Group 8 21 April 2015 633,062 $1.523 Group 9 18 November 2015 200,000 $0.820 Group 10 5 January 2016 742,500 $0.820 Group11 31 May 2016 2,000,000 $0.402 Group 12 26 October 2016 2,232,272 $0.445 Total 10,259,383 ==============================
Vesting conditions
Group 1 - Vested following the Initial Public Offering.
Group 2 - 50% at the end of the first year following the grant date. 12.5% on a quarterly basis during 12 quarters period thereafter.
Groups 3-12 - 25% at the end of the first year following the grant date. 6.25% on a quarterly basis during 12 quarters period thereafter.
The total number of shares exercisable as of 31 December 2016 was 3,840,679 (2015: 8,312,028).
The weighted average fair value of options granted in the year using the Cox, Ross and Rubinstein's Binomial Model (the "Binomial Model") was $0.26. The inputs into the Binomial model are as follows:
2016 2015 $'000 $'000 Early exercise factor 100%-150% 100%-150% Fair value of Group's stock $0.40-$0.80 $0.75-$1.51 Expected Volatility 60% 60% Risk free interest rate 0.25-1.89% 0.5-1.93% Dividend yield - - Forfeiture rate 7%-14% 4%-13%
Expected volatility was determined based on the historical volatility of comparable companies.
Forfeiture rate is assumed to be 7-14% for senior management and 26% for other employees.
The risk-free interest rate was estimated based on average yields of UK Government Bonds.
The Group recognised total share based payments relating to equity-settled share based payment transactions as follows:
2016 2015 $'000 $'000 Share-based payment charge 716 3,407
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2016 2015 ---------------------- --------------------- Weighted Number Weighted Number average of average of exercise options exercise options price price At the beginning of the year $0.66 14,481,158 $0.577 13,869,357 Granted $0.51 5,338,272 $1.42 1,325,500 Lapsed $0.56 (9,560,047) $0.538 (680,665) Exercised - - $0.538 (33,034) --------- ----------- --------- ---------- At the end of the year $0.66 10,259,383 $0.66 14,481,158 ========= =========== ========= ==========
The options outstanding at 31 December 2016 had a weighted average remaining contractual life of 7.9 years (2015: 8.5 years).
7. Earnings per share
Basic loss/earnings per share is calculated by dividing the loss /earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
2016 2015 cents cents Basic and diluted (7.6) (11.9) Adjusted basic 2.7 4.8 Adjusted diluted 2.7 4.6
Adjusted earnings per share is a non-GAAP measure and therefore the approach may differ between companies. Adjusted earnings have been calculated as follows:
2016 2015 $'000 $'000 Loss for the year (10,678) (17,597) Post tax adjustments: Employee share-based payment charge 823 3,343 Exceptional and non-recurring costs 774 1,941 Amortisation on acquired intangible assets 8,208 8,025 Impairment of intangible assets 4,683 9,132 Exceptional tax charge - 2,200 Adjusted profit for the year 3,810 7,044 ======== ======== Number Number Denominator - basic: Weighted average number of equity shares for the purpose of earnings per share 141,068,557 147,779,641 Denominator - diluted Weighted average number of equity shares for the purpose of diluted earnings per share 141,182,911 152,107,062
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 114,354 being the effect of all potentially dilutive Ordinary shares derived from the number of share options granted to employees.
8. Deferred consideration (a) Acquisition of Definiti Media Limited
The consideration for the acquisition of Definiti Media Ltd in May 2014 included $2,489,000 deferred consideration. Of this, $845,000 was repaid during the year ending 31 December 2014, $746,000 was repaid during the year ending 31 December 2015. The remaining was repaid during the year ending 31 December 2016.
In addition, $1,427,000, included as part of the acquisition arrangements, has been recognised directly in the income statement during the year ending 31 December 2015 as set out in note 3.
(b) Acquisition of AjillionMax
The consideration for the acquisition of certain assets of AjilionMAX Limited in May 2014 included $654,000 deferred consideration. Of this $104,000 was repaid during the year ending 31 December 2014, $156,000 was repaid during the year ending 31 December 2015, $189,000 was repaid during the year ending 31 December 2016 and the remaining will be repaid during the year ending 31 December 2017.
In addition, $435,000, included as part of the acquisition arrangements, has been recognised directly in the income statement during the year ending 31 December 2015 as set out in note 3.
(C) Investment in Clearvelvet Trading Ltd
In September 2015, the Group acquired 16.67% of the share capital of Clearvelvet Limited for a total consideration of $850,000, of which $350,000 was paid in 2016 on completion of certain development milestones.
(D) Acquisition of DriverAgent intangibles
In October 2016, the Group acquired the intellectual property of PC maintenance software product, DriverAgent, from eSupport.com, Inc for a total consideration of $1.2 million. The consideration included $0.2 million of deferred consideration which is contingent on future results. Of this $48,000 is expected to be repaid during the year ending 31 December 2017. The remaining is expected repaid during the year ending 31 December 2018.
9. Related party transactions
The Group is controlled by Unikmind Holdings Limited incorporated in British Virgin Islands, which owns 73% of the Company's shares. The controlling party is the Solidinsight Trust, established under the laws of the Isle of Man. Mr. Teddy Sagi is the sole ultimate beneficiary of the Solidinsight Trust.
(a) Related party transactions
The following transactions were carried out with related parties:
2016 2015 $'000 $'000 Revenue from common controlled company 5,034 4,709 Technical support services to end customers provided by common controlled company (2,105) (1,226) Payment processing services provided by common controlled company (300) (774) Office rent expenses to common controlled companies (82) - Revenue from equity investments 100 - 2,647 2,709 ======= ======= (b) Receivables owed by related parties 2016 2015 Name Nature of transaction $'000 $'000 Parent company Unpaid share capital 10 10 Equity investments Loan and Trade 799 - Companies related by virtue of common control Trade 1,022 1,501 1,831 1,511 ===== ===== (c) Payables to related parties 2016 2015 Name Nature of transaction $'000 $'000 Amount owed to Director - 1,151 Companies related by virtue of common control Other 20 425 20 1,576 ===== ===== 10. Intangible assets Intellectual Trademarks Customer Goodwill Internet Capitalised Total Property Lists Domains Software Development Costs $'000 $'000 $'000 $'000 $'000 $'000 $'000 Cost At 1 January 2015 35,205 9,462 2,383 7,684 69 1,113 55,916 Additions - - - - - 1,593 1,593 At 31 December 2015 35,205 9,462 2,383 7,684 69 2,706 57,509 ============= =========== ========= ========= ========= ============= ======= Additions 1,219 - - - - 744 1,963 ------------- ----------- --------- --------- --------- ------------- ------- At 31 December 2016 36,424 9,462 2,383 7,684 69 3,450 59,472 ============= =========== ========= ========= ========= ============= ======= Accumulated amortisation At 1 January 2015 (16,367) (3,241) (400) - - (141) (20,149) Charge for the year (5,953) (1,892) (477) - - (652) (8,974) Impairment losses (4,711) (1,341) (55) (2,316) - (709) (9,132) --------- -------- -------- -------- -------- --------- At 31 December 2015 (27,031) (6,474) (932) (2,316) - (1,502) (38,255) ========= ======== ======== ======== ======== ========= Charge for the period (6,528) (1,494) (483) - - (916) (9,421) Impairment losses - - - (4,683) - - (4,683) --------- -------- -------- -------- -------- --------- At 31 December 2016 (33,559) (7,968) (1,415) (6,999) - (2,418) (52,359) ========= ======== ======== ======== ======== ========= Net book value At 1 January 2015 18,838 6,221 1,983 7,684 69 972 35,767 At 31 December 2015 8,174 2,988 1,451 5,368 69 1,204 19,254 ======= ====== ====== ====== === ====== ======= At 31 December 2016 2,865 1,494 968 685 69 1,032 7,113 ======= ====== ====== ====== === ====== =======
In October 2016, the Group exercised an option to acquire the intellectual property of PC maintenance software product, DriverAgent, from eSupport.com Inc for a total consideration of $1,208,000. $150,000 from the consideration was paid in the year ending 31 December 2015 for the option, $850,000 was paid during the year ending 31 December 2016. Another $208,000 is deferred consideration which is contingent on future results of the product.
Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs), or group of units that are expected to benefit from that business combination. Following the change in reportable segments, the Group goodwill was allocated to the Media segment. Before recognition of the impairment charge, the goodwill has a carrying value as at 31 December 2016 of $5,368,000 (2015: $5,368,000).
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period.
At 31 December 2016, before impairment testing, the carrying value of intangible assets allocated to the Media CGU was $9,417,000, including goodwill of $5,368,000. As a result of the reduction in the management forecasted cash flows attributable to the acquired intangible assets. The carrying value of the goodwill has therefore been reduced to its recoverable amount of $685,000 through recognition of an impairment loss of $4,683,000.
For the Media CGU, the Group has prepared calculations based on cash flow projections for the next five years from the most recent budgets approved by management and extrapolated cash flows beyond this period using an estimated growth rate of 1 per cent (2015: 1 per cent). This rate does not exceed the average long-term growth rate for the relevant markets. The rate used to discount these forecast cash flows is 25 per cent (2015: 25 per cent).
The discount rate used in the valuation of the Media CGU was 25 per cent. If the discount rate was increased by 1 percentage point the impairment would increase by $176,000.
The discount rate used in the valuation of the Web apps and license CGU was reduced to 10 per cent compared to 25 per cent in 2015 as cash flows are generated from two short term license agreements and are considered to be at low risk.
The carrying value of goodwill and intangible assets by CGU less provisions for impairment is set out as follows:
Web Apps Media App Distribution Total and License $'000 $'000 $'000 $'000 Carrying value before impairment losses at 1 January 2016 974 9,417 1,405 11,796 Provisions for impairment - (4,683) - (4,683) ------------ ------- ---------------- ------- Net book value at 31 December 2016 974 4,734 1,405 7,113 ============ ======= ================ =======
At 31 December 2015, before impairment testing, the carrying value of intangible assets allocated to the web apps and License CGU was $17,423,000, including goodwill of $2,316,000. Due to the significant reduction in advertising volumes that management believes can be achieved in the web extensions business in 2016 the group has revised its cash flow forecasts for this CGU. The carrying value of the intangible assets of the web apps and License CGU has therefore been reduced to its recoverable amount of $8,291,000 through recognition of an impairment loss of $9,132,000, of which $2,316,000 has been allocated to goodwill.
Web Apps Media App Distribution Total and License $'000 $'000 $'000 $'000 Carrying value before impairment losses at the 1 January 2015 17,423 10,894 69 28,386 Provisions for impairment (9,132) - - (9,132) ------------ ------ ---------------- ------- Net book value at 31 December 2015 8,291 10,894 69 19,254 ============ ====== ================ =======
The Group tests the useful economic life of the Intangible asset whenever events or changes in circumstances indicate that the useful economic life may need to be changed. The Web Apps initial intellectual property and customer lists were fully amortised in the year ending 31 December 2016 due to a change in management assumptions with the expected useful life of these assets. If the management assumption was not changed, the amortisation attributed to the Web apps intellectual property and customer lists would be $3,865,000 instead of $5,807,000.
11. Subsequent events
On 13 March 2017 the group acquired CyberGhost SRL, a company incorporated in Romania, for initial consideration of EUR6.1 million and potential maximum consideration of EUR3 million. CyberGhost is one of the leading cyber security SaaS providers, with a focus on the provision of Virtual Private Network ("VPN") solution. The acquisition meets the group's previously announced intention to strengthen its B2C market reach, allowing it to operate as a digital distribution and product platform, utilising its existing technology and intellectual property.
Due to the acquisition being executed on the same date as the authorisation of the financial statements the detailed acquisition accounting has not yet been undertaken and is therefore incomplete. It is anticipated that the acquisition will be accounted for in full in the interim financial statements for the period ending 30 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
March 14, 2017 03:01 ET (07:01 GMT)
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