KRM22 PLC Trading Update (3137L)

TIDMKRM

RNS Number : 3137L

KRM22 PLC

12 January 2021

KRM22 plc

("KRM22", the "Group" or the "Company")

Trading update

KRM22 plc (AIM: KRM.L) announces a trading update for the 12 month period to 31 December 2020 ("FY2020").

The Company continued to make good progress during the year, winning top tier institutions as customers. Increases in new contracted ARR have been offset by churn in its existing customer base as firms inevitably adjusted to the new trading environment as a result of COVID-19.

For FY2020 the Group expects to report:

-- A significantly improved adjusted EBITDA loss of approximately GBP0.1m (FY2019: loss of GBP3.1m)

   --        Revenue of approximately GBP4.6m (FY2019: GBP4.1m) 
   --        Gross cash as at 31 December 2020 was GBP2.0m (FY2019: GBP1.1m) 

-- ARR at 31 December 2020 of GBP4.3m (FY2019: GBP4.3m) at the 2020 constant exchange rate (GBP4.1m at current rates)

o New contracted ARR in FY2020 of GBP0.8m, reflecting a gross organic growth rate of 19%

The Company has a near term pipeline of a further GBP0.5m ARR of deals which are in final contract negotiations and which are expected to be signed in Q1 2021. In addition to this the Company has a strong pipeline of opportunities for 2021. Whilst the net contracted ARR has remained static at GBP4.3m, the new contracted ARR in FY2020 is made up of higher quality customers. Sterling's continued strengthening against the US dollar has had a negative impact on contracted ARR as described above.

The Board is pleased to note that the Company signed contracts with two, tier one banks in the second half of the year. One of the contracts covered a pre implementation phase for the At Trade Market Risk product, which will lead to significant contracted ARR in 2021. The second contract for GBP0.2m ARR was signed in December for the Pre Trade Market Risk product.

The total new contracted ARR in FY2020 of GBP0.8m is spread across different risk domains including GBP0.5m on Market Risk products, GBP0.2m on Compliance Risk products and GBP0.1m on Enterprise Risk products. The new contracted ARR is derived from six new customers, including top tier institutions, and two existing customers. The sale of new risk products to existing customers and the signing of a contract for a suite of products to a UK Brokerage firm, as referred to in the announcement of August 2020, demonstrates KRM22's ability to simplify the cost and complexity of risk management through technology delivered on one platform as a one-stop service.

The total churn in FY2020 for institutional customers was GBP0.8m which included some legacy customers acquired through previous acquisitions. In addition, a number of our trader customers were lost as they were unable to trade due to the CME floor being closed as a result of the COVID-19 lockdown. The overall level of churn in FY2020 has been significantly higher than we have experienced historically or was expected but management expects this to stabilise in 2021. We settled the disputed contract referred to in previous announcements in December. While in our view our case was strong, we decided that the agreed settlement was pragmatically the right action to avoid the uncertainty, distraction and cost of litigation. The balance has been written off in FY2020.

Costs continue to be under tight control however we have started to phase back the voluntary salary sacrifices in Q4 2020, with phased full reinstatement starting in January 2021 and expected to complete in January 2022.

The Group's net debt as at 31 December 2020 was GBP1.0m (31 December 2019: GBP0.9m) and included cash of GBP2.0m and gross debt, relating to the three-year convertible loan that was signed with Kestrel Partners LLP in September 2020, of GBP3.0m (31 December 2019: cash of GBP1.1m and gross debt of GBP2.0m).

The Company expects to report full year results for the year to 31 December 2020 on 16 March 2021.

Keith Todd, Executive Chairman and CEO at KRM22, commented: 'The year has been challenging but we have made good progress in improving the quality of our customer revenue base with increased cross sale opportunities and a significant reduction in our adjusted EBITDA loss. The strengthened balance sheet provides a sound financial base for 2021.

Our Global Risk Platform has matured well and has an increasing positive impact in creating new sales opportunities.

The KRM22 business is in a much stronger position than a year ago and is well placed for growth in 2021.'

For further information please contact:

KRM22 plc [e-mail]

Keith Todd CBE, Executive Chairman and CEO

Kim Suter, CFO

   finnCap Ltd (Nominated Adviser and Sole Broker)                                [phone] 

Carl Holmes / Kate Bannatyne / Matthew Radley

Alice Lane / Sunila de Silva (ECM)

About KRM22 plc

KRM22 is a closed-ended investment company which listed on AIM on 30 April 2018. The Company has been established with the objective of creating value for its investors through the investment in, and subsequent growth and development of, target companies in the technology and software sector, with a focus on risk management in capital markets.

Through its investments and the Global Risk Platform, KRM22 helps capital market companies reduce the cost and complexity of risk management. The Global Risk Platform provides applications to help address firms' regulatory, market, technology and operations risk challenges and to manage their entire enterprise risk profile.

Capital markets companies' partner with KRM22 to optimise risk management systems and processes, improving profitability and expanding opportunities to increase portfolio returns by leveraging risk as alpha.

KRM22 plc is listed on AIM and the Group is headquartered in London, with offices in several of the world's major financial centres.

See more about KRM22 at KRM22.com .

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

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January 12, 2021 02:00 ET (07:00 GMT)