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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kin And Carta Plc | LSE:KCT | London | Ordinary Share | GB0007689002 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.20 | 0.15% | 129.60 | 129.20 | 129.80 | 129.60 | 129.60 | 129.60 | 351 | 16:35:24 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Commercial Printing, Nec | 195.87M | -18.77M | -0.1055 | -12.28 | 230.6M |
From Apr 2019 to Apr 2024
TIDMKCT
RNS Number : 7151R
Kin and Carta PLC
10 March 2021
This announcement contains inside information
10 March 2021
Kin and Carta plc
('Kin + Carta', the 'Group', or the 'Company').
Half Year Results
Recovery from pandemic and growing momentum: On track to meet expectations for the year
Kin + Carta, the international digital transformation company, today announces interim results for the period from 1 August 2020 to 31 January 2021
Financial Highlights
-- Net revenue of GBP64.1 million from continuing operations(2) in line with our expectations, down 10% year-on-year. Returned to sequential growth in Q1 and Q2 with momentum increasing into H2
-- Strong pipeline has converted into record backlog(8)
-- Adjusted profit before tax from continuing operations of GBP2.9 million(3) , slightly ahead of our expectations of underlying results. Does not include GBP3.6 million of US government PPP loan forgiveness now expected in H2. This compares to Adjusted profit before tax from continuing operations of GBP4.8 million in H1 20, and GBP5.7 million in H2 20
-- Total loss before tax from continuing operations of GBP6.4 million (2020: loss of GBP6.5 million)
-- Net debt reduced to GBP22.5 million (31 July 2020: GBP31.6million); net debt to Adjusted EBITDA ratio of 1.6x
-- Divestment of non-core Ventures businesses Hive and Pragma for proceeds of GBP14m before customary adjustments for cash, debt and working capital
-- Acquired Cascade Data Labs, a Portland, Oregon-based data transformation consultancy for an initial consideration of USD $6.9 million (GBP5.0 million)
Operational Highlights
-- Recovery from pandemic showing sustainable momentum; 90-day net revenue backlog is 77% larger than the start of the fiscal year and 27% larger than February 2020, pre-pandemic
-- Launched Kin + Carta Data Labs to focus on our clients' data transformation needs; already producing key wins with HP, Adobe, Vizio and the British Heart Foundation
-- Partnership channel driving new client growth; GBP15 million of new wins with Google and Microsoft
-- Continued focus on ESG achieved B Corp certification in US with Europe anticipated to follow later in the year
-- Growing reputation as a destination for top global talent; over 100 roles filled since November with more to follow in H2, all delivering on record backlog
Hot Features
Premium
-- Continue to focus on M&A opportunities
6 months to 6 months to like- for-
31 January 31 January like
2021 2020 (restated)* % change growth (1)
================================ ================= ============================ ================ =================
Net revenue (continuing
operations)
(2) GBP64.1m GBP71.6m (10%) (1 6)%
Adjusted profit before tax
(continuing operations)
(3) GBP2.9m GBP4.8m (40)%
Adjusted basic earnings
per
share (continuing
operations)
(4) 1.39p 2.46p (43)%
Total profit/ (loss)
before
tax (continuing and
discontinued
operations) (5) GBP0.0m GBP(5.9)m
Total basic earnings/
(loss)
per share (continuing and
discontinued) (6) 0.63p (3.54)p
Interim dividend Nil Nil
================================ ================= ============================ ================ =================
Net debt(7) GBP22.5m GBP39.5m GBP(17.0)m -
================================ ================= ============================ ================ =================
* Results for the 6 months ended 31 January 2020 have been restated to reflect continuing operations only. Continuing operations exclude the results of the divestments of The Health Hive (US) LLC, The Health Hive Group Limited and subsidiaries and Pragma Consulting Limited (note 5).
1 Like-for-like growth in relation to net revenue is defined as the net revenue from operations at constant currency and excluding acquisitions when comparing the current period to the prior period.
2 Net revenue is defined as gross revenue excluding all direct costs and third party expenses passed to clients.
3 This measure is defined as the net profit before tax less Adjusting Items. Adjusted results exclude Adjusting Items to enhance understanding of the ongoing financial performance of the Group. Adjusting Items comprise redundancies, restructuring costs; gain or loss on disposal of subsidiaries and properties; impairment or amortisation charges related to tangible assets; contingent consideration required to be treated as remuneration; and costs related to the Company's Defined Benefits Pension Scheme (note 6)
4 This measure is defined as basic earnings per share after Adjusting Items. Further details are provided within the Alternative Performance Measures section.
5 This is the Group result before tax (see section "Impact of Adjusting items on Group results" in note 6) prepared in accordance with IAS 34. Also see further details in the Basis of Preparation (note 1).
6 This is calculated by dividing the total profit for the period attributable to ordinary equity holders of the parent company by the weighted average number of shares in issue during the period, excluding shares held as own shares by the Group.
7 Bank loans payable and US government loans payable under the Paycheck Protection Program, less cash and cash equivalents
8 Backlog is the value of client awards that have a signed contract, statement of work or an explicit verbal commitment to start work with no further permissions or conditions required.
J Schwan, CEO, said:
"Kin + Carta is back in growth mode. Our record backlog of orders is 27% larger than it was pre-pandemic and the appetite for our digital transformation services continues to accelerate in all of our markets. The launch of Kin and Carta Data Labs is already generating new clients and is a differentiating skillset as clients increasingly seek to address their data transformation needs. We have made great strides with our ESG agenda, achieving B-Corp certification in the US and Europe is on track for later this year. Our ESG focus coupled with our application of the world's most exciting emerging technologies is allowing us to attract top digital talent to service the growing demand for our capabilities."
For further information, please contact:
Kin and Carta plc Numis Securities
J Schwan, Chief Executive Limited
Officer Nick Westlake / Matt
Chris Kutsor, Chief Financial Lewis
Officer +44 (0)207 260 1345
+44 (0)20 7928 8844
Powerscourt Peel Hunt LLP
Elly Williamson / Jessica Edward Knight/John
Hodgson Welch
+44 (0)20 3328 8386 +44 (0) 20 7418 8900
About Kin + Carta
Kin + Carta is a responsible and growing global digital technology services company delivering outcome-based transformation across four key elements of the digital transformation value chain; data, technology, experience, and organisational change.
To serve and scale within the rapidly growing digital transformation market, Kin + Carta is structured as a platform-based organisation that enables the borderless connection of three valuable schools of specialist talent:
-- Kin + Carta Advise - Digitally native management consultancy. Our sector-focused consultants help the C-Suite better understand the shifts in their market and how their products and services need to evolve.
-- Kin + Carta Create - Modern cloud, data and software engineering studio. Our 800+ data scientists, software engineers and designers utilise emerging technologies to create new products and platforms for our CIO clients.
-- Kin + Carta Connect - Data-driven marketing technology agency. Our MarTech experts help our CMO clients amplify their digital investments by implementing and optimising modern marketing technology and data platforms.
Headquartered in London and Chicago, Kin + Carta nurtures c1,500 engineers, strategists and designers within a maker-culture that serves the healthcare, financial services, B2B, consumer, agriculture and transportation sectors.
Kin + Carta is on the road to achieving B Corp certification for all its operating subsidiaries, meeting the highest standards of verified social and environmental performance, public transparency, and accountability to balance profit and purpose.
Chief Executive's Review
Momentum Accelerating
INTRODUCTION
I am pleased to report that in such uncertain times, Kin + Carta has performed well in our first half of fiscal 2021. Continued impacts of the pandemic in the first quarter were followed by a solid recovery in growth in the second quarter, with momentum building. We remain optimistic for our full-year performance with growth across Advise, Create and Connect and in our most strategic accounts including Discover Financial Services, Corteva, M&S and Santander as well as multiple new wins in both the US and UK including SecureWorks, Syngenta, Fifth Third Bank, Blue Origin, Citizens Advice Scotland and The Economist. We now have in place the largest backlog ever of committed work.
The faster US recovery, the disposals of non-core Ventures businesses (healthcare communications agency Hive and airport specialty consultancy Pragma), as well as the recent acquisition of Portland-based data science firm Cascade Data Labs ("Cascade") will continue to shift the balance of our revenue footprint further into the US, the largest digital transformation market in the world, and towards our high-value Create pillar. The Cascade acquisition will follow a similar integration plan as our successful Spire Digital (now known as Kin and Carta Denver) integration. Many new data opportunities have already been generated both from our existing clients and via our Connective platform, global partnerships and US sales channels.
FINANCIAL PERFORMANCE
Group net revenue of GBP64.1 million (including c. GBP0.4 million from Cascade acquired in December 2020) was down 10% on the comparable period due to the pandemic headwinds. Organic net revenue at constant currency rates was down 16%.
Net revenue bottomed in Q4 of FY20. Since then, quarterly net revenue has grown sequentially, with Q1 of the current fiscal year growing 3% over Q4, and Q2 growing at 15% over Q1 on the back of a resurgent pipeline and new client wins. That growth trend is continuing into the second half.
US-based net revenue increased to 60% of the group in H1 compared to 53% last year. We expect this trend to continue despite the headwinds of recent USD currency depreciation. US net revenue was down 4% including Kin and Carta Denver (formerly Spire Digital) and Cascade compared to the prior half year. Europe net revenue was down 16% compared to the prior half year. Both regions returned to double-digit sequential growth in Q2.
Our core digital transformation business comprising Advise, Create and Connect is now 82% of total net revenue.
-- Advise (2% of net revenue) was flat at GBP1.1 million with more recent wins comprising cross-sold opportunities with Create and Connect.
-- Create (63% of net revenue) was down 12% to GBP40.3 million due to the pandemic headwinds causing some large clients to temporarily pause or slow work. Strong demand returned during the period with double-digit sequential growth in Q2. Momentum is continuing underpinned by a strong pipeline and backlog entering H2.
-- Connect (17% of net revenue) grew 2% to GBP11.1 million, benefitting from the prior year's restructuring and the managed services part of the business holding firm.
Ventures (18% of net revenue) was down 16% to GBP11.6 million due to the pandemic and from exiting unprofitable business lines as part of the prior year's restructuring. The restructuring and renewed focus has enabled a return to growth and profitability. We expect this improving financial performance to continue. These businesses remain under strategic review.
Adjusted operating margin of 6.5% was as expected but is well below our full-year expectations due to the effects of the pandemic, particularly in Q1. In addition, it was adversely impacted by revenue seasonality and the timing of the majority of income related to the US Government Paycheck Protection Program ("PPP") loan forgiveness moving into H2. We expect strong double-digit H2 net revenue growth and this is expected to deliver full year margin in line with our expectations, underpinned by a strong pipeline and new client wins across the business.
Adjusted profit before tax was GBP2.9 million (2020: GBP4.8 million). Compared to H1 20, the lower adjusted profit is primarily due to the reduction in net revenue as a result of the pandemic and one-time costs associated with the PPP in order to retain jobs. This was partially offset by lower interest costs on reduced borrowing.
The Company accessed the PPP last summer to mitigate the impacts of COVID-19 that would otherwise have resulted in significant US employee reductions. During the first half, the Company absorbed employment and project delivery costs that enabled the Company to retain talent within the business and to maintain client goodwill. These costs have an anticipated offsetting credit from PPP loan forgiveness of GBP4.4 million, of which GBP0.8 million was received in H1 and the balance anticipated in H2.
Compared to H2 20, adjusted profit before tax improved when removing the effects of income and expenses associated with government assistance programs and related one-time cost savings in both periods as summarised below. We anticipate this improving profitability trend to continue in H2.
(GBPM's) H2 FY20 H1 FY21
Adjusted PBT as reported 5.7 2.9
------------- -------------
One time cost savings
/ salary sacrifice (2.0) 0.0
------------- -------------
US PPP Forgiveness Income 0.0 (0.8)
------------- -------------
Project costs funded from
government assistance
programmes 1.0 3.0
------------- -------------
Adjusted PBT excluding
items above 4.7 5.1
------------- -------------
Total loss before tax from continuing operations was GBP6.4 million (H1 20: loss of GBP6.5 million), which is stated after net adjusting cost items of GBP9.3 million (H1 20: GBP11.3 million). Adjusting items include GBP4.9 million related to the amortisation of acquired intangibles, GBP1.7 million of consideration required to be treated as remuneration for the Spire Digital and Cascade acquisitions, GBP0.2 million of costs related to those acquisitions, and GBP2.2 million relating to the Company's legacy Defined Benefits Pension Scheme. Further details are provided within note 6 and the Alternative Performance Measures contained in note 14.
Our balance sheet remains strong. The cash inflow from operations before working capital of GBP4.6 million is lower than the comparable prior year period (GBP6.0 million) due to the decline in net revenue related to the pandemic. The net working capital outflow of GBP1.5 million reflects primarily higher accounts receivable balances as a result of revenue growth versus the final quarter of the prior financial year. The divestment proceeds from the Hive sale net of cash outflows for the Cascade acquisition and modest capital expenditure combined to generate investing cash inflows of GBP7.2 million. We have seen no deterioration in collections from customers or significant bad debts. Our clients continue to be primarily blue-chip multi-billion dollar enterprise customers over a multi-year engagement. Two-thirds of our net revenue comes from clients who we have served for 3 years or more.
Our net debt is GBP22.5 million at 31 January 2021 compared to GBP31.6 million at fiscal year-end 31 July 2020 and GBP39.5 million at H1 20. In addition to cash flow of GBP6.5 million generated before repayment of bank debt, we experienced currency gains on net debt denominated in US dollars of GBP1.8 million, and reductions of GBP0.8 million due to US government PPP loans being forgiven. We expect an additional GBP3.6 million of PPP loan forgiveness in H2. Debt is drawn in US dollars to hedge our US dollar denominated earnings and hence to mitigate currency impact on our leverage ratio. Our debt headroom remains strong with a facility of GBP85 million committed until November 2022. Our net debt to EBITDA leverage ratio for bank purposes on a pre-IFRS 16 basis was 1.3X at 31 January 2021, and we expect this ratio to be within the 1.0x- 1.5x range at 31 July 2021. Our banks exclude PPP loans from the debt calculation as they anticipate that it will be forgiven. Including the PPP loans as debt, our net debt to EBITDA ratio is 1.6X.
The pension accounting surplus increased at the half year to GBP5.0m from GBP1.1m at 31 July 2020 due to the strength of recovery in growth assets. The Scheme asset hedging strategy largely mitigated against increases in discount rates and inflation rates.
No interim dividend is proposed. The Board will revisit the dividend later in the year as part of its capital allocation strategy.
OPERATIONAL HIGHLIGHTS
The Company's performance at the beginning of the first half was subject to many clients freezing budgets for the short-term in the late spring/early summer of 2020, the peak months of the pandemic. However, a growing realisation that sustainable digital transformation is a business necessity - accelerated by the pressure of the pandemic - subsequently led to strong demand as the period progressed. The Company won several project extensions with existing customers as well as several strategic remits with new customers. While Europe was a bit slower to bounce back than the US, we are now seeing a significant increase in demand on both sides of the Atlantic. As of the end of February, our 90-day net revenue backlog is 77% larger than at the start of our fiscal year (1 August 2020) and 27% larger than February 2020 (before the start of the pandemic).
We are seeing increases in demand for our services across the board. Additionally, our new Data Transformation offering within the Create pillar has been accelerating rapidly, as evidenced by our Pepsi win at the beginning of the fiscal year, which is now contracted with an 8-figure annual spend. To more specifically address this growing area of data within the digital transformation market, we recently combined Kin + Carta Create's Artificial Intelligence capabilities with Cascade's Data Science capabilities to launch Kin + Carta Data Labs (www. kinandcartadatalabs.com ) to the market. Kin + Carta Data Labs will specifically focus on the Chief Data Officer's transformation agenda. This data-focused offering has led to additional strategic wins with HP, Adobe, Vizio and the British Heart Foundation. We look forward to sharing more about Kin + Carta Data Labs in the months ahead.
This increase in demand has led to a significant workforce expansion. Since November we have hired over 100 employees across our three continents with significantly more open roles to fill globally in order to meet existing client demand. With our focus on social responsibility, inclusion, diversity and the application of the world's most exciting emerging technologies, Kin + Carta has become a clear destination for some of the world's top digital talent enabling us to continue scaling our next-generation workforce across North America, South America and Europe.
STRATEGIC PRIORITIES
We have made significant progress on our strategic priorities in our first half:
-- Digital transformation Focus/Platform Enhancement
Continued rationalization of our portfolio, alongside the launch of Kin + Carta Data Labs. Ventures of Edit and Incite both profitable and growing, remaining under strategic review.
-- Partnership Growth
Signed over GBP15 million in new partner channel business in H1 (vs. GBP7.1 million in new business signed in all of FY20) driven by expanding relationships with Microsoft and Google.
-- Geographic Expansion
Cascade acquisition facilitated expansion into the Pacific Northwest of the US with new clients Vizio, HP, Adobe and Starbucks. Continuing to court additional M&A prospects with new acquisitions being targeted in strategic geographic areas.
-- Global Delivery Model
An increase in our Buenos Aires headcount by over 50% with further expansion in nearshore locations by the end of this fiscal year.
-- Social Responsibility
Americas achieved B-Corp certification with Europe on track for H2. The launch of our IDEA (Inclusion, Diversity, Equity and Awareness) strategic plan alongside an achievement of 98% pay equity across gender and racial dimensions, with a plan to reach 100% pay equity by the end of this fiscal year.
OUTLOOK
Strong demand for our services in the digital transformation sector combined with our successful focus on being a destination for top digital talent gives the Board confidence of achieving significant growth in the second half and meeting expectations for the full year. Trading at the start of the second half underpins these expectations as market demand for our services continues to increase in all of our regions, as evidenced by our growing pipeline and record backlog.
J Schwan
Chief Executive Officer
9 March 2021
Condensed Consolidated Income Statement - unaudited
6 months
to
Year
31 January to
2020 31 July
6 months to 31 January
2021 (Restated)* 2020
Adjusted Adjusting Total Total Statutory
Results** Items Results Results Results
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
====================== ========== ================ ================ ============== ================== ===============
Revenue 2 77,130 - 77,130 84,079 158,369
========== ================ ================ ============== ------------------ ---------------
Project-related
costs (13,008) - (13,008) (12,504) (20,678)
====================== ========== ================ ================ ============== ================== ===============
Net revenue 64,122 - 64,122 71,575 137,691
====================== ========== ================ ================ ============== ================== ===============
Cost of service (33,561) - (33,561) (36,820) (70,432)
====================== ========== ================ ================ ============== ================== ===============
Gross profit 30,561 - 30,561 34,755 67,259
====================== ========== ================ ================ ============== ================== ===============
Selling costs (9,007) - (9,007) (8,964) (15,528)
========== ================ ================ ============== ------------------ ---------------
Administrative
expenses (18,481) (2,511) (20,992) (21,961) (46,883)
========== ================ ================ ============== ------------------ ---------------
Other operating
income 4 847 - 847 - (17)
========== ================ ================ ============== ------------------ ---------------
Share of results
of joint
arrangements 222 - 222 427 721
========== ================ ================ ============== ------------------ ---------------
Amortisation of
acquired
intangibles - (4,915) (4,915) (4,709) (10,563)
========== ================ ================ ============== ------------------ ---------------
Impairment of
goodwill and
acquired
intangibles - - - - (18,850)
========== ================ ================ ============== ------------------ ---------------
Contingent
consideration
treated
as remuneration - (1,659) (1,659) (3,813) (6,186)
========== ================ ================ ============== ------------------ ---------------
Acquisition
costs - (248) (248) (533) (669)
====================== ========== ================ ================ ============== ================== ===============
Operating
profit/ (loss) 6a 4,142 (9,333) (5,191) (4,798) (30,716)
====================== ========== ================ ================ ============== ================== ===============
Net pension
finance income - 8 8 78 161
========== ================ ================ ============== ------------------ ---------------
Other finance
expense 7 (1,248) - (1,248) (1,731) (3,293)
====================== ========== ================ ================ ============== ================== ===============
Profit/ (loss)
before tax 6b 2,894 (9,325) (6,431) (6,451) (33,848)
====================== ========== ================ ================ ============== ================== ===============
Income tax
(charge)/
credit (556) 1,848 1,292 357 2,167
========== ================ ================ ============== ------------------ ---------------
Net profit/
(loss) from
continuing
operations 2,338 (7,477) (5,139) (6,094) (31,681)
========== ================ ================ ============== ------------------ ---------------
Net profit/
(loss) from
discontinued
operations 5 1,030 5,176 6,206 468 (570)
====================== ========== ================ ================ ============== ================== ===============
Net profit/
(loss) for the
period 3,368 (2,301) 1,067 (5,626) (32,251)
====================== ========== ================ ================ ============== ================== ===============
Basic earnings/
(loss) per share
(p)
========== ================ ================ ============== ------------------ ---------------
Continuing
operations 1.39 (4.43) (3.04) (3.83) (19.33)
========== ================ ================ ============== ------------------ ---------------
Discontinued
operations 0.61 3.06 3.67 0.29 (0.35)
========== ================ ================ ============== ------------------ ---------------
Continuing and
discontinued
operations 9 2.00 (1.37) 0.63 (3.54) (19.68)
====================== ========== ================ ================ ============== ================== ===============
Diluted
earnings/(loss)
per share
(p)
========== ================ ================ ============== ------------------ ---------------
Continuing
operations 1.36 (4.43) (3.07) (3.83) (19.33)
========== ================ ================ ============== ------------------ ---------------
Discontinued
operations 0.60 3.06 3.66 0.29 (0.35)
========== ================ ================ ============== ------------------ ---------------
Continuing and
discontinued
operations 9 1.96 (1.37) 0.59 (3.54) (19.68)
====================== ========== ================ ================ ============== ================== ===============
*Results have been restated to show continued and discontinued operations separately. Further details are in note 5, 6b and 14.
**Adjusted results exclude Adjusting Items to enhance understanding of the ongoing financial performance of the Group. Adjusting Items comprise of redundancies, restructuring costs; gain or loss on disposal of properties, tangible and intangible assets; contingent consideration required to be treated as remuneration; and costs related to the Company's Defined Benefits Pension Scheme. Further details are provided within the Alternative Performance Measure section (note 1 4).
Condensed Consolidated Statement of Comprehensive Income - unaudited
6 months
6 months to Year to
to 31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
======================================================= ==================== ================= ==============
Profit/ (loss) for the period 1,067 (5,626) (32,251)
==================== ----------------- --------------
Items that will not be reclassified subsequently
to profit or loss:
==================== ----------------- --------------
Actuarial gain/ (loss) on defined benefits
pension scheme 4,082 (2,808) (7,358)
==================== ----------------- --------------
Tax (charge)/credit on items taken through
other comprehensive income (776) 477 1,342
======================================================= ==================== ================= ==============
Total items that will not be reclassified
to profit or loss 3,306 (2,331) (6,016)
======================================================= ==================== ================= ==============
Items that may be reclassified subsequently
to profit or loss:
==================== ----------------- --------------
Transfers of (gains)/ losses gains on cash
flow hedges (21) 201 201
==================== ----------------- --------------
Gains/ (losses) on cash flow hedges 51 118 (52)
==================== ----------------- --------------
Foreign exchange losses (354) (2,570) (669)
======================================================= ==================== ================= ==============
(324) (2,251) (520)
======================================================= ==================== ================= ==============
Other comprehensive income/ (expense) for
the period 2,982 (4,582) (6,536)
======================================================= ==================== ================= ==============
Total comprehensive income/ (expense) for
the period 4,049 (10,208) (38,787)
======================================================= ==================== ================= ==============
Condensed Consolidated Statement of Changes in Equity - unaudited
Hedging Retained
Additional Share and earnings/
Share paid-in ESOP Treasury option translation Other (accumulated
capital capital^ reserve shares reserve reserve reserves deficit) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Balance at 3
August
2019 15,343 70,665 (21) (163) 804 2,285 73,570 (924) 87,989
============= ================ ============= ============== ============= ================= ============== ================== ==============
Loss for the
period - - - - - - - (5,626) (5,626)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Other
comprehensive
expense - - - - - (2,251) (2,251) (2,331) (4,582)
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Total
comprehensive
expense - - - - - (2,251) (2,251) (7,957) (10,208)
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Adjustment
following
adoption of IFRS
16 - - - - - - - (1,770) (1,770)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Share placement 1,533 11,651 - - - - 11,651 - 13,184
============= ================ ============= ============== ============= ================= ============== ================== ==============
Currency
translation - 132 - - - - 132 - 132
============= ================ ============= ============== ============= ================= ============== ================== ==============
Dividends - - - - - - - (1,993) (1,993)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Recognition of
share-based
payments - - - - 407 - 407 - 407
============= ================ ============= ============== ============= ================= ============== ================== ==============
Recognition of
share-based
contingent
consideration
deemed as
remuneration - - - - 137 - 137 - 137
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Balance at 31
January
2020 16,876 82,448 (21) (163) 1,348 34 83,646 (12,644) 87,878
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Loss for the
period - - - - - - - (26,625) (26,625)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Other
comprehensive
income - - - - - 1,731 1,731 (3,685) (1,954)
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Total
comprehensive
income - - - - - 1,731 1,731 (30,310) (28,579)
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Share placement - (132) - - - - (132) - (132)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Dividends - - - - - - - - -
============= ================ ============= ============== ============= ================= ============== ================== ==============
Recognition of
share-based
contingent
consideration
deemed as
remuneration - - - - 510 - 510 - 510
============= ================ ============= ============== ============= ================= ============== ================== ==============
Revaluation - - - - - 143 143 - 143
============= ================ ============= ============== ============= ================= ============== ================== ==============
Purchase of own
shares - - (47) - - - (47) - (47)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Recognition of
share-based
payments - - - - (136) - (136) - (136)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Tax on
share-based
payments - - - - 75 - 75 - 75
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Balance at 31
July
2020 16,876 82,316 (68) (163) 1,797 1,908 85,790 (42,954) 59,712
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Profit for the
period - - - - - - - 1,067 1,067
============= ================ ============= ============== ============= ================= ============== ================== ==============
Other
comprehensive
(expense)/income - - - - - (324) (324) 3,306 2,982
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Total
comprehensive
(expense)/income - - - - - (324) (324) 4,373 4,049
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Share allocation 18 1 (19) - - - (18) - -
============= ================ ============= ============== ============= ================= ============== ================== ==============
Purchase of
shares - - (59) - - - (59) (59)
============= ================ ============= ============== ============= ================= ============== ================== ==============
Recognition of
share-based
payments - - - - 880 - 880 - 880
============= ================ ============= ============== ============= ================= ============== ================== ==============
Recognition of
share-based
contingent
consideration
deemed as
remuneration - - - - 876 - 876 - 876
============= ================ ============= ============== ============= ================= ============== ================== ==============
Settlement of
share-based
payment - - 15 - (110) - (95) 95 -
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
Balance at 31
January
2021 16,894 82,317 (131) (163) 3,443 1,584 87,050 (38,486) 65,458
======================= ============= ================ ============= ============== ============= ================= ============== ================== ==============
(^) Additional paid capital includes share premium, merger reserve and capital redemption reverse
Condensed Consolidated Balance Sheet - unaudited
31 January 31 January 31 July
2021 2020 2020
Note GBP'000 GBP'000 GBP'000
======================================= ========== ================ ================ ==============
Assets
========== ================ ---------------- --------------
Non-current assets
========== ================ ---------------- --------------
Property, plant and equipment 16,370 23,218 17,714
========== ================ ---------------- --------------
Investment property 4,572 4,841 4,707
========== ================ ---------------- --------------
Goodwill 71,608 91,746 68,010
========== ================ ---------------- --------------
Other intangible assets 16,613 29,792 21,948
========== ================ ---------------- --------------
Investment in joint arrangements 1,051 610 880
========== ================ ---------------- --------------
Retirement benefits surplus 10 4,950 5,240 1,081
========== ================ ---------------- --------------
Other non-current assets 19 79 -
========== ================ ---------------- --------------
Deferred tax assets 1,652 2,636 2,477
======================================= ========== ================ ================ ==============
116,835 158,162 116,817
======================================= ========== ================ ================ ==============
Current assets
========== ================ ---------------- --------------
Trade and other receivables 33,268 39,837 28,165
========== ================ ---------------- --------------
Derivative financial instruments 25 135 48
========== ================ ---------------- --------------
Income tax receivable 523 - -
========== ================ ---------------- --------------
Assets held for sale - - 9,843
========== ================ ---------------- --------------
Cash and cash equivalents 25,930 5,662 24,408
======================================= ========== ================ ================ ==============
59,746 45,634 62,464
======================================= ========== ================ ================ ==============
Total assets 176,581 203,796 179,281
======================================= ========== ================ ================ ==============
Liabilities
========== ================ ---------------- --------------
Current liabilities
========== ================ ---------------- --------------
Lease liabilities 3,992 4,288 3,492
========== ================ ---------------- --------------
Trade and other payables 29,085 23,421 24,510
========== ================ ---------------- --------------
Derivative financial instruments - - 40
========== ================ ---------------- --------------
Income tax payable 364 1,368 110
========== ================ ---------------- --------------
Deferred consideration payable 3,344 4,498 3,277
========== ================ ---------------- --------------
Liabilities held for sale - - 2,652
========== ================ ---------------- --------------
Deferred income 7,039 6,650 7,565
========== ================ ---------------- --------------
Provisions 662 1,795 1,141
======================================= ========== ================ ================ ==============
44,486 42,020 42,787
======================================= ========== ================ ================ ==============
Non-current liabilities
========== ================ ---------------- --------------
Lease liabilities 14,414 18,895 16,287
========== ================ ---------------- --------------
Loans 48,482 45,172 56,007
========== ================ ---------------- --------------
Deferred consideration payable 1,134 4,267 624
========== ================ ---------------- --------------
Other non-current liabilities 101 120 -
========== ================ ---------------- --------------
Provisions 1,503 1,107 1,368
========== ================ ---------------- --------------
Deferred tax liabilities 1,003 4,320 2,496
======================================= ========== ================ ================ ==============
66,637 73,881 76,782
======================================= ========== ================ ================ ==============
Total liabilities 111,123 115,901 119,569
======================================= ========== ================ ================ ==============
Net assets 65,458 87,895 59,712
======================================= ========== ================ ================ ==============
Capital and reserves
======================================= ========== ================ ================ ==============
Share capital 8 16,894 16,876 16,876
========== ================ ---------------- --------------
Other reserves 87,050 83,646 85,790
========== ================ ---------------- --------------
Accumulated deficit (38,486) (12,627) (42,954)
======================================= ========== ================ ================ ==============
Total equity 65,458 87,895 59,712
======================================= ========== ================ ================ ==============
These financial statements were approved by the Board of Directors on 9 March 2021.
Condensed Consolidated Statement of Cash Flows - unaudited
6 months 6 months
to to Year to
31 January 31 January 31 July
2021 2020 2020
Note GBP'000 GBP'000 GBP'000
=============================================== ========== ================= ================= ==============
Operating activities
========== ================= ----------------- --------------
Cash generated from operations 11 3,030 5,727 22,850
========== ================= ----------------- --------------
Interest paid (882) (1,204) (1,600)
========== ================= ----------------- --------------
Income taxes paid (749) (1,268) (1,598)
=============================================== ========== ================= ================= ==============
Net cash flows from operating activities 1,399 3,255 19,652
=============================================== ========== ================= ================= ==============
Investing activities
========== ================= ----------------- --------------
Purchase of property, plant and
equipment (431) (654) (858)
========== ================= ----------------- --------------
Purchase of other intangibles (11) (280) (213)
========== ================= ----------------- --------------
Proceeds on disposal of subsidiaries 12,634 - -
========== ================= ----------------- --------------
Cost of acquisition in current period 3 (4,970) (10,996) (17,310)
========== ================= ----------------- --------------
Deferred consideration paid for
acquisitions made in prior periods - (1,171) (2,000)
=============================================== ========== ================= ================= ==============
Net cash flows from investing activities 7,222 (13,101) (20,381)
=============================================== ========== ================= ================= ==============
Financing activities
========== ================= ----------------- --------------
Purchase of shares for Employee
Benefit Trust (59) - (47)
========== ================= ----------------- --------------
Proceeds of share placement - 13,185 13,184
========== ================= ----------------- --------------
Dividends paid 8 - (1,993) (1,993)
========== ================= ----------------- --------------
Lease payments (2,049) (1,937) (4,843)
========== ================= ----------------- --------------
Decrease in bank loans 11 (4,727) (14,007) (856)
=============================================== ========== ================= ================= ==============
Net cash flows from financing activities (6,835) (4,752) 5,445
=============================================== ========== ================= ================= ==============
Net increase/ (decrease) in cash
and cash equivalents 1,786 (14,598) 4,716
========== ================= ================= ==============
Cash and cash equivalents at beginning
of the period 24,408 22,017 22,017
========== ================= ----------------- --------------
Effect of foreign exchange rate
changes (264) (1,757) (2,325)
=============================================== ========== ================= ================= ==============
Cash and cash equivalents at end
of the period 25,930 5,662 24,408
=============================================== ========== ================= ================= ==============
Included in the figures above are the following cash flows from discontinued activities
6 months 6 months
to to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
=================================================== ================= ================= ==============
Net cash generated from operating activities 2,004 2,732 2,840
================= ----------------- --------------
Net cash flows from investing activities 12,634 (13) (36)
================= ----------------- --------------
Net cash used in financing activities (100) (200) (400)
==================================================== ================= ================= ==============
Net increase in cash and cash equivalents 14,538 2,519 2,404
==================================================== ================= ================= ==============
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of preparation
The Condensed Consolidated Financial Statements for the six months ended 31 January 2021 have been prepared in accordance with IAS 34 "Interim Financial Statements" as adopted by the European Union and in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority ("FCA").
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax. Income tax expense is recognised based on management's estimate of the weighted average effective annual income tax rate expected for the full financial year.
The half year statements (also the "Condensed Consolidated Financial Statements") have not been audited but have been reviewed by the Company's auditor.
The financial information for the six months ended 31 January 2021 and prior half year comparatives do not comprise statutory accounts for the purpose of Section 434(3) of the Companies Act 2006. The abridged information for the year to 31 July 2020 has been extracted from the Group's Annual Report and Accounts 2020 which have been filed with the Registrar of Companies. The Auditors' report on the Group's Annual Report and Accounts for that period was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.
Accounting policies
New accounting standards, amendments to standards, and IFRIC interpretations which became applicable during the period were either not relevant or had no impact on the Group's net results or net assets.
Going concern
The Directors, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for a period of at least 12 months from the date of approval of the Condensed Consolidated Financial Statements. These include the assumptions around the Group's products and markets, expenditure commitments, expected cash flows and borrowing facilities. Taking into account reasonable possible changes in trading performance, and after making enquiries, the directors consider it appropriate to continue to adopt the going concern basis in preparing the Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2021.
Critical estimates and critical judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results might differ from these estimates.
1. Basis of preparation (continued)
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 July 2020, with the exception of changes in estimates that are required in determining the provision for income taxes.
2. Segment reporting
The Group delivers transformative growth for the world's largest companies and delivers services regionally in the US and Europe across three specialisms; Advise, Create and Connect, collectively called The Connective and additionally through its Ventures. See the 'About Kin + Carta' section above for details.
The Group reports its results through one segment - The Connective - and with corporate costs shown as a separate segment based on the Group's internal reporting to the Chief Operating Decision Maker ('CODM'). The CODM has been determined to be the Chief Executive Officer and Chief Financial Officer who are primarily responsible for the assessment of the performance of the businesses/ brands which currently operate under The Connective.
The corporate costs are reported separately to the single operating segment as this presentation better reflects the segment's underlying profitability.
Results from continuing operations for the current period:
6 months to 31 January 2021
The Connective Corporate costs Total
GBP'000 GBP'000 GBP'000
================================================ ==================== ===================== ==============
Revenue 77,130 - 77,130
================================================ ==================== ===================== ==============
Net revenue 64,122 - 64,122
==================== ===================== ==============
Adjusted net revenue 64,122 - 64,122
================================================ ==================== ===================== ==============
Operating profit/ (loss) before Adjusting
Items 7,709 (3,567) 4,142
==================== ===================== ==============
Adjusting Items (7,136) (2,197) (9,333)
================================================ ==================== ===================== ==============
Total operating profit/ (loss) 573 (5,764) (5,191)
================================================ ==================== ===================== ==============
Results from continuing operations for the prior period ended 31 January 2020:
Corporate
The Connective costs Total
GBP'000 GBP'000 GBP'000
================================================ ==================== =============== ===============
Revenue 84,079 - 84,079
================================================ ==================== =============== ===============
Net revenue 71,575 - 71,575
==================== =============== ===============
Adjusted net revenue 71,575 - 71,575
================================================ ==================== =============== ===============
Operating profit/ (loss) before Adjusting
Items 9,386 (2,832) 6,554
==================== =============== ===============
Adjusting Items (10,167) (1,185) (11,352)
================================================ ==================== =============== ===============
Total operating loss (781) (4,017) (4,798)
================================================ ==================== =============== ===============
2. Segment reporting (continued)
Results from operations for the prior period ended 31 July 2020:
Year to 31 July 2020
Corporate
The Connective costs Total
GBP'000 GBP'000 GBP'000
====================================== ==================== =============== ==============
Revenue 158,369 - 158,369
====================================== ==================== =============== ==============
Net revenue 137,691 - 137,691
==================== =============== ==============
Adjusting Items 88 - 88
====================================== ==================== =============== ==============
Adjusted net revenue 137,779 - 137,779
====================================== ==================== =============== ==============
Operating profit/ (loss) before
Adjusting Items 20,247 (6,419) 13,828
==================== =============== ==============
Adjusting Items (42,292) (2,252) (44,544)
====================================== ==================== =============== ==============
Statutory operating loss (22,045) (8,671) (30,716)
====================================== ==================== =============== ==============
No disclosure of assets and liabilities as no assets and liabilities are allocated to Corporate costs.
Geographical segments
Revenue by geographical segment is based on the location where goods and services have been provided.
31 January 31 January
2021 2020 31 July 2020
Continuing operations GBP'000 GBP'000 GBP'000
=============================== ================ ================ ==================
United States of America 38,744 38,762 77,504
================ ---------------- ------------------
United Kingdom 37,768 44,812 79,984
================ ---------------- ------------------
Rest of the world 618 505 881
=============================== ================ ================ ==================
Total 77,130 84,079 158,369
=============================== ================ ================ ==================
Revenue by customer location
The Group derives 50% (6 months ended 31 January 2020: 46%) of its revenue from customers located in the United States of America, 49% (6 months ended 31 January 2020: 53%) customers located in the United Kingdom and 1% (6 months ended 31 January 2020: 1%) from customers located in the rest of the world.
Net revenue by customer location
The Group derives 60% (6 months ended 31 January 2020: 53%) of its net revenue from customers located in the United States of America, 36% (6 months ended 31 January 2020: 41%) customers located in the United Kingdom and 4% (6 months ended 31 January 2020: 6%) from customers located in the rest of the world.
3. Acquisitions
Cascade Data Labs, LLC
On 23 December 2020, the Group acquired 100% of the issued stock of Cascade Data Labs, LLC ("Cascade"), a data transformation business based in Portland, Oregon, USA. Given the proximity of the acquisition to 31 January 2021 the purchase price allocation has not been completed and the surplus of consideration over historical net assets has provisionally been allocated to goodwill. The purchase price allocation, which will be complete by 31 July 2021, will likely see a significant portion of the provisional goodwill figure reallocated to customer relationships and proprietary techniques. In line with the provision of IFRS 3, further fair value adjustments may be required within the 12-month period from the date of acquisition. Any fair value adjustments in this period will result in an adjustment to the goodwill balance reported above. The goodwill that arose on the combinations can be attributed to the value of future growth from new customers and the assembled workforce. The provisional amounts recognised for each class of assets and liabilities at the acquisition date were as follows:
Fair value of net
assets
GBP'000
================================== =======================
Trade and other receivables 487
=======================
Bank balances and cash 268
=======================
Trade and other payables (214)
==================================== =======================
Net assets acquired 541
==================================== =======================
Goodwill 4,697
=======================
Total consideration 5,238
==================================== =======================
The fair value of the components of estimated total consideration payable are as follows:
Non-contingent Contingent
consideration consideration Total consideration
GBP'000 GBP'000 GBP'000
=============================================== ==================== ==================== =========================
Cash consideration payment in the current
period 5,238 - 5,238
==================== ==================== =========================
Estimated future consideration payable
in cash and shares - 7,400 7,400
=============================================== ==================== ==================== =========================
Total consideration 5,238 7,400 12,638
=============================================== ==================== ==================== =========================
Up to 75% of the estimated future consideration may be paid in ordinary shares of Kin and Carta plc at the Company's discretion.
Deemed Remuneration
GBP'000
=========================================================== =========================
Deemed remuneration - current liability 66
=========================
Deemed remuneration - non-current liability 59
============================================================ =========================
125
=========================================================== =========================
Recorded within equity 375
============================================================ =========================
500
=========================================================== =========================
Estimated payable in cash and shares not yet accrued 6,900
============================================================ =========================
7,400
=========================================================== =========================
3. Acquisitions (continued)
Consideration which is contingent upon service by the potential recipients is recognised in the income statement over the period of the contingent arrangement as deemed remuneration. Deferred consideration is payable dependent upon the level of incremental EBITDA achieved by Cascade for the periods ending 30 June 2021 and 30 September 2022. Any deferred consideration payable vests over variable periods, the last of which ends in September 2024.
The total consideration payable, including contingent consideration payable which is deemed as remuneration, is capped at GBP22.3 million.
The maximum amount of the performance-related deferred consideration payable is GBP17.3 million, and the minimum is GBPnil. The amount of deferred payments to be treated as deemed remuneration has been recognised as the estimated amount payable based on available business forecasts, and has not been discounted since the effect of discounting is not considered to be material.
The acquisition had the following impact on cash outflows in the current period:
GBP'000
=============================================================== =============
Cash consideration 5,238
=============
Less cash acquired (268)
=============================================================== =============
Investing cash outflows 4,970
=============
Acquisition costs recognised in adjusting administrative
expenses. 248
=============================================================== =============
Net cash outflow 5,218
=============================================================== =============
4. Other Income
In the prior financial year, partially forgivable loans of GBP6.6 million were received by US entities under the US Government CARES Act Payment Protection Program. These were recorded as loans in the balance sheet at 31 July 2020, and an application for forgiveness of GBP4.5 million of eligible loans was made. In January 2021 we received confirmation of forgiveness of GBP0.8 million of these loans. The forgiveness has been recorded within adjusted other income in the income statement in accordance with IAS20 Government Grants. In respect of the further GBP3.6 million we expect to receive confirmation before the end of the current financial year, and further forgiveness will be recorded as adjusted other income. The remaining balance will be repaid on maturity in May 2022.
5. Discontinued Operations
Discontinued operations comprise the results of two divested businesses: Pragma, a commercial retail space consulting business, and Hive, a healthcare communications consultancy. On 31 August 2020, Pragma was divested for a consideration of GBP0.25 million, before adjustments for cash, debt and working capital items, received in cash at completion. On 16 December 2020, Hive was divested for a consideration of GBP13.8 million before adjustments for cash, debt and working capital items received in cash at completion. After adjustments for cash, debt and working capital, net proceeds from the two divestments of GBP12.6 million were received in the period. The net gain on divestment of the two businesses was GBP5.2 million. Both businesses were classified as assets held for sale at 31 July 2020.
The impact of discontinued operations on the group was as follows;
6 months 6 months Year ended
ended 31 ended 31 31 July 2020
January 2021 January 2020
==================================================== =================== =================== ===================
Profit from discontinued operations before
Adjusting Items:
==================================================== =================== =================== ===================
Revenue 3,659 5,537 9,647
=================== ------------------- -------------------
Operating costs (2,375) (4,920) (8,548)
==================================================== =================== =================== ===================
Operating profit before Adjusting Items 1,284 617 1,099
==================================================== =================== =================== ===================
Interest charges (13) (39) (12)
==================================================== =================== =================== ===================
Profit before tax before Adjusting Items 1,271 578 1,087
==================================================== =================== =================== ===================
Income tax charge (241) (110) (230)
==================================================== =================== =================== ===================
Profit after tax before Adjusting Items 1,030 468 857
==================================================== =================== =================== ===================
Adjusting Items after tax - - (1,427)
=================== ------------------- -------------------
Gain on divestment of discontinued operations 5,176 - -
==================================================== =================== =================== ===================
Total Adjusting Items 5,176 - (1,427)
==================================================== =================== =================== ===================
Profit/ (loss) from discontinued operations:
=================== ------------------- -------------------
Profit after tax before adjusting items 1,030 468 857
==================================================== =================== ------------------- -------------------
Adjusting Items 5,176 - (1,427)
==================================================== =================== =================== ===================
Total profit/ (loss) after tax 6,206 468 (570)
==================================================== =================== =================== ===================
6a. Adjusting items
Adjusting items from continuing operations disclosed on the face of the Consolidated Income Statement are as follows:
6 months to 6 months to Year to
Continuing Operations 31 January 2021 31 January 2020 31 July 2020
Expense/ (income) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ============= ============= ============= ============= ============= =============
Restructuring items
============= ============= ------------- ------------- ------------- -------------
Redundancies and other
charges 160 819 3,456
============= ============= ------------- ------------- ------------- -------------
Losses related to
closure
of subsidiary - 412 318
============= ============= ------------- ------------- ------------- -------------
(Credit)/ costs
associated
with empty properties - (208) 1,262
============= ============= ------------- ------------- ------------- -------------
Impairment of tangible
assets 154 89 2,475
============= ============= ------------- ------------- ------------- -------------
Reduction in lease
liabilities - - (758)
============= ============= ------------- ------------- ------------- -------------
Gain on sale of
investment
in minority interest - - (198)
============================ ============= ============= ============= ============= ============= =============
314 1,112 6,555
============================ ============= ============= ============= ============= ============= =============
Defined Benefits
Pension
Scheme costs
============= ============= ------------- ------------- ------------- -------------
Scheme administration
costs 537 263 624
============= ============= ------------- ------------- ------------- -------------
Scheme past service
costs
- GMP equalisation 604 - -
============= ============= ------------- ------------- ------------- -------------
Other Scheme related
costs 1,056 922 1,051
============================ ============= ============= ============= ============= ============= =============
2,197 1,185 1,675
============================ ============= ============= ============= ============= ============= =============
Costs relating to
acquisitions
made in current and
prior
periods
============= ============= ------------- ------------- ------------- -------------
Costs associated with
businesses
acquired in the
current
period 248 533 669
============= ============= ------------- ------------- ------------- -------------
Amortisation of
acquired
intangibles 4,915 4,709 10,563
============= ============= ------------- ------------- ------------- -------------
Impairment of goodwill
and
acquired intangible
assets - - 18,850
============= ============= ------------- ------------- ------------- -------------
Contingent
consideration
required to be
treated as
remuneration 1,659 3,813 6,186
============= ============= ------------- ------------- ------------- -------------
6,822 9,055 36,268
============================ ============= ============= ============= ============= ============= =============
Adjusting Items in
expenses 9,333 11,352 44,498
============================ ============= ============= ============= ============= ============= =============
Loss on disposal of
property,
plant and equipment - - 46
============================ ============= ============= ============= ============= ============= =============
Adjusting Items before
interest
and tax 9,333 11,352 44,544
============================ ============= ============= ============= ============= ============= =============
Net pension finance
income
in respect of defined
benefits
pension scheme (8) (78) (161)
============================ ============= ============= ============= ============= ============= =============
Adjusting Items before
tax 9,325 11,274 44,383
============================ ============= ============= ============= ============= ============= =============
Income tax credit (1,848) (1,270) (4,168)
============================ ============= ============= ============= ============= ============= =============
Adjusted results after
tax 7,477 10,004 40,215
============================ ============= ============= ============= ============= ============= =============
Restructuring items
Redundancy and restructuring costs of GBP0.3 million relate to severances in the US and a property lease termination in the UK under restructuring programs commenced in the prior financial year.
Defined Benefits Pension Scheme costs
The Scheme charges include service costs of GBP0.5 million, GBP0.6 million of further past service costs related to GMP equalisation on members who have transferred out of the Scheme following further clarification on the Lloyds case and costs in relation to running the scheme of GBP1.1 million. These items are recorded in corporate costs.
Costs related to acquisitions made in the current and prior periods
Acquisition costs of GBP0.2 million were incurred as part of the acquisition of Cascade Data Labs, LLC in December 2020.
Charges relating to the amortisation of acquired customer relationships, proprietary techniques and software amounted to GBP4.9 million in the current period.
During the period, charges relating to contingent consideration deemed as remuneration of GBP1.7 million (2020: GBP3.8m) were recorded in the Consolidated Income Statement as Adjusting Items. The charges in the period are in respect of the acquisition of Kin and Carta Denver (formally SpireMedia, Inc. d.b.a. Spire Digital) (GBP1.1 million) and Cascade (GBP0.5 million).
In the current period, the tax credit of GBP1.8 million (2020 - GBP1.3 million) relates to the items discussed above.
6b. Impact of Adjusting items on Group results
The table below shows an analysis and impact of adjusting items on continuing and discontinued operations on certain of the Group's headline results:
6 months to 31 January 6 months to 31 January 12 months to 31 July
2021 2020 2020
Adjusted Adjusting Total Adjusted Adjusting Total Adjusted Adjusting Statutory
Results Items Results Results Items Results Results Items Results
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Net Revenue 64,122 - 64,122 71,575 - 71,575 137,691 - 137,691
=============== ================ ============== --------------- ---------------- -------------- --------------- ---------------- ----------------
Operating
profit/
(loss) 4,142 (9,333) (5,191) 6,554 (11,352) (4,798) 13,828 (44,544) (30,716)
=============== ================ ============== --------------- ---------------- -------------- --------------- ---------------- ----------------
Net pension
finance
income - 8 8 - 78 78 - 161 161
=============== ================ ============== --------------- ---------------- -------------- --------------- ---------------- ----------------
Other finance
expense (1,248) - (1,248) (1,731) - (1,731) (3,293) - (3,293)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Profit before
tax/ (loss)
from
continuing
operations 2,894 (9,325) (6,431) 4,823 (11,274) (6,451) 10,535 (44,383) (33,848)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Profit/
(loss)
before tax
from
discontinued
operations 1,271 5,176 6,447 578 - 578 1,087 (1,427) (340)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Profit before
tax 4,165 (4,149) 16 5,401 (11,274) (5,873) 11,622 (45,810) (34,188)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Income tax
(charge)/
credit from
continuing
operations (556) 1,848 1,292 (913) 1,270 357 (2,001) 4,168 2,167
=============== ================ ============== --------------- ---------------- -------------- --------------- ---------------- ----------------
Income tax
charge
from
discontinued
operations (241) - (241) (110) - (110) (230) - (230)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Net profit/
(loss)
for the
period 3,368 (2,301) 1,067 4,378 (10,004) (5,626) 9,391 (41,642) (32,251)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Net profit/
(loss)
from
continuing
operations 2,338 (7,477) (5,139) 3,910 (10,004) (6,094) 8,534 (40,215) (31,681)
=============== ================ ============== --------------- ---------------- -------------- --------------- ---------------- ----------------
Net profit/
(loss)
from
discontinued
operations 1,030 5,176 6,206 468 - 468 857 (1,427) (570)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
Net profit/
(loss)
for the
period 3,368 (2,301) 1,067 4,378 (10,004) (5,626) 9,391 (41,642) (32,251)
=================== =============== ================ ============== =============== ================ ============== =============== ================ ================
7. Other finance costs
6 months 6 months
to to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
================================================= ================= ================= ==============
Interest and bank arrangement fees on bank
overdrafts and loans 819 1,204 2,193
Interest on lease liabilities 429 527 1,100
================================================= ================= ================= ==============
1,248 1,731 3,293
================================================= ================= ================= ==============
8. Dividends
6 months 6 months Year to
to 31 January to 31 January 31 July
2021 2020 2020
per share GBP'000 GBP'000 GBP'000
========================================= =============== ==================== ==================== ==============
Final dividend paid for the period
ended 3 August 2019 1.30p - 1,993 1,993
========================================= =============== ==================== ==================== ==============
Dividends paid during the period - 1,993 1,993
========================================= =============== ==================== ==================== ==============
9. Earnings per share
The calculation of the basic and diluted earnings per share are based on the following:
6 months 6 months Year to
to 31 January to 31 January 31 July
2021 2020 2020
'000 '000 '000
====================================================== ===================== ==================== ==============
Weighted average number of ordinary shares
for the purposes of basic and diluted earnings
per share 168,714 159,147 163,870
===================== -------------------- --------------
Effect of dilutive potential ordinary shares:
===================== -------------------- --------------
Share options 2,609 - 2,313
====================================================== ===================== ==================== ==============
Weighted average number of ordinary shares
for the purposes of diluted earnings per share 171,323 159,147 166,183
====================================================== ===================== ==================== ==============
9. Earnings per share (continued)
Basic and diluted earnings per share
6 months to
31 January 6 months to 31 Year to 31
2021 January 2020 July 2020
GBP'000 GBP'000 GBP'000
Continuing and discontinued operations Earnings Earnings
per Earning
Earnings share GBP'000 Earnings per share
Earning
per share
GBP'000 pence (Restated) pence (Restatd) GBP'000 pence
============================================= =============== ============== ================== ===================== =============== ===============
Earnings/ (loss) and basic earnings/
(loss) per share
=============== ============== ------------------ --------------------- --------------- ---------------
Adjusted earnings and adjusted
basic earnings per share 3,368 2.00 4,378 2.75 9,391 5.73
=============== ============== ------------------ --------------------- --------------- ---------------
Adjusting Items (2,301) (1.37) (10,004) (6.29) (41,642) (25.41)
============================================= =============== ============== ================== ===================== =============== ===============
Earnings/ (loss) and basic earnings/
(loss) per share 1,067 0.63 (5,626) (3.54) (32,251) (19.68)
============================================= =============== ============== ================== ===================== =============== ===============
Earnings/ (loss) and diluted
earnings/ (loss) per share
=============== ============== ------------------ --------------------- --------------- ---------------
Adjusted earnings and adjusted
diluted earnings per share 3,368 1.96 4,378 2.75 9,391 5.73
=============== ============== ------------------ --------------------- --------------- ---------------
Adjusting Items (2,301) (1.37) (10,004) (6.29) (41,642) (25.41)
============================================= =============== ============== ================== ===================== =============== ===============
Earnings/ (loss) and diluted
earnings/ (loss) per share 1,067 0.59 (5,626) (3.54) (32,251) (19.68)
============================================= =============== ============== ================== ===================== =============== ===============
Adjusted earnings is calculated by adding back Adjusting Items (note 6), as adjusted for tax, to the profit or loss for the period.
10. Retirement benefits
As at 31 January 2021 the Group reported a net surplus in respect of the Defined Benefit Pension Scheme (the 'Scheme') of GBP5.0 million compared to a surplus of GBP1.1 million reported as at 31 July 2020. The increase in the surplus is due to the performance of growth assets.
11. Notes to the consolidated cash flow statement
Reconciliation of cash generated from operations
6 months
to 6 months to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
================================================== ======= ================= ================= ==============
Loss from continuing operations (5,191) (4,798) (30,716)
======= ================= ----------------- --------------
Profit/ (loss) from discontinued operations 6,460 617 (328)
================================================== ======= ================= ================= ==============
Operating profit/ (loss) 1,269 (4,181) (31,044)
================================================== ======= ================= ================= ==============
Adjustments for:
======= ================= ----------------- --------------
Depreciation of property, plant and
equipment 1,961 2,933 5,995
======= ================= ----------------- --------------
Share of results of joint arrangements (222) (427) (721)
======= ================= ----------------- --------------
Disbursements from joint arrangement - 303 303
======= ================= ----------------- --------------
Impairment losses 151 89 22,790
======= ================= ----------------- --------------
Amortisation of intangible assets 5,033 4,832 10,789
======= ================= ----------------- --------------
Forgiveness of US government loans 4 (849) - -
======= ================= ----------------- --------------
Loss on disposal of property, plant
and equipment - - 92
======= ================= ----------------- --------------
Gain on disposal of subsidiaries (5,176) - -
======= ================= ----------------- --------------
Share-based payment charge 880 544 272
======= ================= ----------------- --------------
Non-cash reductions in lease liabilities - - (758)
======= ================= ----------------- --------------
Increase in fair value of derivatives - (293) -
======= ================= ----------------- --------------
Increase / (decrease) in retirement
benefit obligations 214 (1,306) (1,614)
======= ================= ----------------- --------------
Increase in contingent consideration
required to be treated as remuneration 1,659 3,813 6,186
======= ================= ----------------- --------------
Decrease in provisions (345) (346) (628)
================================================== ======= ================= ================= ==============
Operating cash inflows before movements
in working capital 4,575 5,961 11,662
================================================== ======= ================= ================= ==============
(Increase)/ decrease in receivables (6,249) 2,483 11,003
======= ================= ----------------- --------------
Increase/ (decrease) in payables 4,963 (3,538) (2,189)
======= ================= ----------------- --------------
(Decrease)/ increase in deferred income (259) 821 2,374
================================================== ======= ================= ================= ==============
Cash generated from operations 3,030 5,727 22,850
================================================== ======= ================= ================= ==============
11. Notes to the consolidated cash flow statement (continued)
Cash and cash equivalents (which are presented as a single class of assets on the face of the consolidated balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.
The effective interest rates on cash and cash equivalents are based on current market rates.
Analysis of financing liabilities
Forgiveness
Financing through Other 31
1 August cash operating non-cash Exchange January
2020 flows cash flow items differences 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== ============== ============ ================= ============== ================= ==============
US
government
loans (6,721) - 849 - 261 (5,611)
============== ============ ================= ============== ================= ==============
Bank loans (49,286) 4,727 - 1,688 (42,871)
============== ============ ================= ============== ================= ==============
Lease
liabilities (19,779) 2,049 - (1,242) 565 (18,407)
================== ============== ============ ================= ============== ================= ==============
As detailed in note 4, US government loans received under the Paycheck Protection Program of GBP0.8 million were forgiven in the period and the forgiveness has been recorded in the Consolidated Income Statement under "Other operating income". The extinguishment of the US government loans through forgiveness has been recorded as an adjustment in arriving at cash generated from operations.
Included in other non-cash lease liability movements are the liabilities created in respect of new leases net of those extinguished through early lease termination as well as finance lease interest.
12. Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. No material related party transactions have been entered into during the period, which might reasonably affect the decisions made by the users of these financial statements.
No executive officers of the Company or their associates had material transactions with the Group during the period.
12. Related parties (continued)
The Group holds a 50% interest in Loop Integration LLC ("Loop"), incorporated in Delaware, USA. Loop is an e-commerce consultancy specialising in Hybris software integration. Loop earned revenue of GBP1.7 million (2020: nil) from the Group. The Group provided services to Loop for GBP1,500 in the period (HY 2020: GBP52,000). On 31 January 2021 the following balances were outstanding for services rendered between Loop and the Group. The Group owed Loop GBP0.9 million (HY 2020: receivable from Loop of GBP2,500). In the prior period the Group received a distribution of USD 250,000 and loan repayment of GBP 150,000 from Loop.
SpireMedia, Inc (d.b.a. Kin and Carta Denver) a 100% subsidiary was acquired by the group in November 2019. Simoleon LLC ("Simoleon") used to provide office space to Kin and Carta Denver in a lease that ended in December 2020. Simoleon LLC is partly controlled by Adam Hasemeyer and Michael Gellman with another third party, and they also controlled Kin and Carta Denver before it was acquired by the Group. Mr Hasemeyer and Mr Gellman became employees of the Group following the acquisition of Spire. During the period Kin and Carta Denver paid USD 104,500 (HY 2020: USD 60,488) to Simoleon LLC for office space. There were no outstanding amounts due to Simoleon LLC at 31 January 2021.
13. Post-balance sheet event
On 2 March 2021 the final deferred consideration associated with the acquisition of SpireMedia, Inc (d.b.a. Kin and Carta Denver) was determined. This will be settled in the form of cash of $6.5 million together with the allotment of 3.6 million ordinary shares of Kin and Carta plc to the former owners. It is expected that in March 2021 $2.2 million of the total $6.5 million cash amount will be paid and 1.3 million of the shares will be allocated to the former owners on a fully vested basis. The balance of 2.3 million shares (the "unvested shares") will also be allocated at the same time, subject to lock-up and orderly market arrangements, and will not be vested until 1 March 2023. At that later date, the remaining cash of $4.3 million (the "unvested cash") will be paid to the former owners. The unvested shares and unvested cash are both subject to service conditions for the individual recipients.
14. Alternative Performance Measures ('APMs')
The half year results include both statutory and Adjusted results. In the management's view, the Adjusted results reflect the ongoing performance of the business, how the business is managed on a day to day basis and allows for a consistent and meaningful comparison.
The APMs are aligned to our strategy and are used to measure the performance of our business and are the basis for remuneration.
The Adjusted results exclude the items listed below as their inclusion could distort the understanding of the performance for the year and the comparison with prior years.
Key adjustments for Adjusted operating profit, profit before tax and EPS
Adjusted operating profit is calculated by adding back costs relating to restructuring activities, acquisitions made in current and prior periods, the disposal of surplus property, impairment charges, movements in deferred consideration beefed it up now. and the St Ives Defined Benefit Pension Scheme. The tax effects of these adjustments are reflected in the Adjusted tax charge. The adjustments are detailed below:
1. Profit on the disposal of property plant and equipment and restructuring costs - these items are excluded in order to reflect the performance of the business in a consistent manner and how the performance of the business is managed on a day to day basis. They are not considered to be part of the core activities of the business.
They have arisen as a result of initiatives to reduce the cost base and improve efficiency and collaboration across the group. The initiatives reflect a significant change in the organisational structure of a business area are assessed on an individual basis and are excluded from the Adjusted results.
2. Amortisation of acquired intangibles and impairments - the amortisation and impairments of assets acquired through business combinations are excluded from Adjusted results. These costs are acquisition related and are not part of the ongoing trading performance of the business. The amortisation of computer software is included within the Adjusted results as it is part of the ongoing trading performance.
3. Contingent consideration required to be treated as remuneration, and increase in deferred consideration - our acquisitions, where deferred consideration arises, are structured such that the consideration payable to former owners who remain as employees is contingent on continued employment within the Group. Under IFRS 3 this is treated as an expense. Where the purchase price has been determined initially based on assumptions around future deferred consideration and there is a subsequent increase or decrease arising from the reassessment of deferred consideration, under IFRS 3 this is required to be expensed. We consider this not to be part of the ongoing trading performance.
4. Administrative expenses related to St Ives Defined Benefits Pension Scheme - the Scheme was closed to new members in 2002 and ceased future accrual in 2008. There are now less than five employees who are members of the Scheme and still employed by the Group. On the disposal of the Books segment Kin and Carta plc is the last remaining employer. The costs of the Scheme including administration costs, past service costs related to Guaranteed Minimum pension 'GMP' and pension finance charge/(credit) are not considered to be part of the on-going performance of the Group and they are excluded from the performance measures. As such they are treated as Adjusting items.
14. Alternative Performance Measures (continued)
The analysis of Adjusting Items for continuing operations is set out below:
6 months
6 months to to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
================================================== ================= ================= ==============
Loss on disposal of property, plant and
equipment - - 46
================= ----------------- --------------
Amortisation of acquired intangibles 4,915 4,709 10,563
================= ----------------- --------------
Expenses related to restructuring items 160 1,023 6,555
================= ----------------- --------------
Impairment of goodwill and other assets 154 89 18,850
================= ----------------- --------------
Contingent consideration required to be
treated as remuneration 1,659 3,813 6,186
================= ----------------- --------------
Acquisition costs 248 533 669
================= ----------------- --------------
Expense related to St Ives Defined Benefits
Pension Scheme 2,197 1,185 1,675
================================================== ================= ================= ==============
Total Adjusting Items added back to the
total operating profit 9,333 11,352 44,544
================= ----------------- --------------
Pension finance credit (8) (78) (161)
================================================== ================= ================= ==============
Total Adjusting Items added back to the
total profit before tax 9,325 11,274 44,383
================= ----------------- --------------
Tax related to Adjusting Items (1,848) (1,270) (4,168)
================================================== ================= ================= ==============
Total Adjusting Items added back to the
total profit after tax 7,477 10,004 40,215
================================================== ================= ================= ==============
The key APMs frequently used by the Group are:
Adjusted net revenue: The measure is defined as Adjusted revenue less project-related costs as shown on the consolidated income statement. Project-related costs are primarily in our Ventures businesses, and comprise primarily third-party pass-through expenses and direct costs attributable to a project.
6 months to 6 months to
31 January 31 January Year to
2021 2020 31 July 2020
GBP'000 GBP'000 GBP'000
=================================================== ================= ================= ===================
Adjusted revenue (continuing operations) 77,130 84,061 158,239
================= ----------------- -------------------
Project-related costs (13,008) (12,486) (20,460)
=================================================== ================= ================= ===================
Adjusted net revenue (continuing operations) 64,122 71,575 137,779
=================================================== ================= ================= ===================
14. Alternative Performance Measures (continued)
Like-for-like Adjusted net revenue at constant currency: The measure is defined as the Adjusted net organic revenue from continuing operations when comparing the current period to the prior period at constant currency rate of exchange.
6 months to 6 months to
31 January 31 January
2021 2020
GBP'000 GBP'000
================================================= ================= =================
Adjusted net revenue 64,122 71,575
================= -----------------
Impact of acquisition in current period (5,020) -
================= -----------------
Effect of constant currency 1,176 -
================================================= ================= =================
Like-for-like Adjusted net revenue 60,278 71,575
================================================== ================= =================
Like-for-like Adjusted net revenue decline
% -15.8%
================================================== ================= =================
Adjusted operating profit: This measure is defined as the operating profit or loss less Adjusting Items.
6 months 6 months
to to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
=============================================== ================= ================= ==============
Total operating loss (5,191) (4,798) (30,716)
================= ----------------- --------------
Add back total Adjusting Items excluding
pension finance charge and tax 9,333 11,352 44,544
=============================================== ================= ================= ==============
Adjusted operating profit 4,142 6,554 13,828
=============================================== ================= ================= ==============
Like-for-like Adjusted operating profit at constant currency: The measure is defined as the Adjusted organic operating profit from continuing operations when comparing the current period to the prior period at constant currency rate of exchange.
6 months
6 months to to
31 January 31 January
2021 2020
GBP'000 GBP'000
====================================================== ================= ==============
Adjusted operating profit 4,142 6,554
================= --------------
Impact of acquisition in current period (1,244) -
================= --------------
Effect of constant currency 167 -
====================================================== ================= ==============
Like-for-like Adjusted operating profit 3,065 6,554
======================================================= ================= ==============
Like-for-like Adjusted operating profit decline
% -53.2% -
======================================================= ================= ==============
14. Alternative Performance Measures (continued)
Adjusted profit before tax: This measure is defined as the Group net profit or loss before tax less Adjusting Items.
6 month to 6 months to
31 January 31 January Year to31
2021 2020 July 2020
GBP'000 GBP'000 GBP'000
============================================ ================= ================= ================
Total loss before tax (6,431) (6,451) (33,848)
================= ----------------- ----------------
Add back total Adjusting Items before
tax 9,325 11,274 44,383
============================================ ================= ================= ================
Adjusted profit before tax 2,894 4,823 10,535
============================================ ================= ================= ================
Adjusted profit after tax: This measure is defined as the Group profit or loss after tax before Adjusting Items:
6 months to 6 months to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
=========================================== ================= ================= ==============
Total loss after tax (5,139) (6,094) (31,681)
================= ----------------- --------------
Add back total Adjusting Items after
tax 7,477 10,004 40,215
=========================================== ================= ================= ==============
Adjusted profit after tax 2,338 3,910 8,534
=========================================== ================= ================= ==============
Adjusted basic earnings per share: This measure is defined as basic earnings per share after Adjusting Items.
6 months to 6 months to Year to
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
================================================ ================= ================= ==============
Adjusted profit after tax 2,338 3,910 8,534
================= ----------------- --------------
Weighted number of shares ('000) 168,714 159,147 163,871
================================================ ================= ================= ==============
Adjusted basic earnings per share (pence) 1.39 2.46 5.21
================================================ ================= ================= ==============
14. Alternative Performance Measures (continued)
Adjusted operating margin: This measure is defined as the percentage of Adjusted operating profit over Net revenue.
6 months
to Year to
6 months to 31 January 31 July
31 January 2021 2020 2020
GBP'000 GBP'000 GBP'000
================================ ====================== ================= ==============
Adjusted net revenue 64,122 71,575 137,779
====================== ----------------- --------------
Adjusted operating profit 4,142 6,554 13,828
================================ ====================== ================= ==============
Adjusted operating margin 6% 9% 10%
================================ ====================== ================= ==============
Adjusted EBITDA for covenant purposes: This measure is calculated using the preceding 12 months results and is defined as the Adjusted operating profit or loss before depreciation, amortisation, finance expense and taxation. Covenant adjustments represent the deduction of pre-IFRS 16 property rent charges and the addition of pre-acquisition operating profit related to Cascade Data Labs, LLC for the period from 1 February 2020 to 31 December 2020.
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
=================================================== ================ ================ ==============
Adjusted operating profit (pro forma) 11,416 17,873 13,828
================ ---------------- --------------
Add: depreciation and amortisation 15,436 12,406 16,206
================ ---------------- --------------
Less: amortisation of intangibles classified
as Adjusting Items (10,769) (7,947) (10,563)
=================================================== ================ ================ ==============
Adjusted EBITDA 16,083 22,332 19,471
=================================================== ================ ================ ==============
Covenant adjustment (2,118) (409) (2,185)
=================================================== ================ ================ ==============
Adjusted EBITDA for covenant purposes 13,965 21,923 17,286
=================================================== ================ ================ ==============
Net debt: This measure is calculated as the total of loans and other borrowings (both current and non-current) excluding finance leases, less cash and cash equivalents.
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
====================================== ================ ================ ==============
Loans - non-current liabilities 48,482 45,172 56,007
================ ---------------- --------------
Cash and cash equivalents (25,930) (5,662) (24,408)
====================================== ================ ================ ==============
Net debt 22,552 39,510 31,599
====================================== ================ ================ ==============
14. Alternative Performance Measures (continued)
For the measurement of the bank covenants, cash, cash equivalents and borrowings denominated in currencies other than Pound Sterling are translated at an average rate rather than at the period end spot rate used in the Consolidated Balance Sheet. Borrowings drawn under the US government Paycheck Protection Program are excluded from the calculation. The reconciliation is as follows:
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
=============================================== ================ ================ ==============
Net debt 22,552 39,510 31,599
================ ---------------- --------------
Foreign exchange difference between spot
rate and average rate 1,683 283 487
================ ---------------- --------------
Deduct Paycheck Protection Program loan (5,611) - (6,721)
=============================================== ================ ================ ==============
Net debt for leverage covenant purposes 18,624 39,793 25,365
=============================================== ================ ================ ==============
Net debt to Adjusted EBITDA: This measure is calculated by dividing Net Debt by Adjusted EBITDA on a pre-IFRS 16 basis. The Adjusted EBITDA is based on the total of continuing and discontinued operations.
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
======================================= =========== =========== =========
Adjusted EBITDA for covenant purposes 13,964 21,923 17,286
=========== ----------- ---------
Net debt 22,552 39,510 31,599
======================================= =========== =========== =========
Net debt to Adjusted EBITDA 1.6 1.8 1.8
======================================= =========== =========== =========
Net debt to Adjusted EBITDA for bank covenant purposes: This measure is calculated by dividing Net Debt by pro forma Adjusted EBITDA
31 January 31 January 31 July
2021 2020 2020
GBP'000 GBP'000 GBP'000
=============================================== ================ ================ ==============
Adjusted EBITDA for covenant purposes 13,964 21,923 17,286
================ ---------------- --------------
Net debt for covenant purposes 18,624 39,793 25,365
=============================================== ================ ================ ==============
Net debt to Adjusted EBITDA for covenant
purposes 1.3 1.8 1.5
=============================================== ================ ================ ==============
15. Principal risks and uncertainties
The Board considers that the categories of principal risks and uncertainties which could have a material impact on the Group's performance in the remaining six months of the financial year remain the same as those stated on pages 80 to 87 of the 2020 Annual Report and Accounts, which is available on our website https://investors.kinandcarta.com
The Board continues to evaluate the potential impact of the Covid-19 pandemic on the Group's ongoing client projects, revenue pipeline, its people and business operations as the situation evolves, allowing mitigation activities to be embedded so that such risks are managed.
16. Statement of Directors' Responsibility
The directors' confirm that these Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rules sourcebook 4.2.7 and 4.2.8, namely:
-- an indication of important events that have occurred during the first six months and their impact on the Condensed Consolidated Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial period; and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the Kin and Carta plc 2020 Annual Report and Accounts.
Neither the Company nor directors accept any liability to any person in relation to the half-year financial report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of Financial Services and Markets Act 2000.
At the date of this statement, the directors are those listed in the Kin and Carta plc 2020 Annual Report and Accounts.
J Schwan
Chief Executive Officer
9 March 2021
The foregoing contains forward looking statements made by the directors in good faith based on information available to them up to 10 March 2021. Such statements need to be read with caution due to inherent uncertainties, including economic, business, political and social risk factors underlying such statements.
Independent review report to Kin and Carta plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Kin and Carta plc's consolidated interim financial statements (the "interim financial statements") in the Half Year Results of Kin and Carta plc for the 6 month period ended 31 January 2021 (the "period").
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Balance Sheet as at 31 January 2021; -- the Condensed Consolidated Income Statement for the period then ended; -- the Condensed Consolidated Statement of Cash Flows for the period then ended; -- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results of Kin and Carta plc have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Half Year Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Half Year Results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 March 2021
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END
IR FFFILVRIAIIL
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