TIDMARC

RNS Number : 9664P

Arcontech Group PLC

23 February 2021

ARCONTECH GROUP PLC

("Arcontech" or the "Group")

INTERIM RESULTS FOR THE SIX MONTHSED 31 DECEMBER 2020

Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, is pleased to report its unaudited results for the six months ended 31 December 2020.

Highlights:

-- Turnover increased by 4.7% to GBP1,542,816 (six months ended 31 December 2019: GBP1,473,651)

-- Profit before tax decreased by 8% to GBP506,237 (six months ended 31 December 2019: GBP551,847) reflecting the full cost of investment in our sales team

-- Annual run-rate of recurring revenues at 31 December 2020 increased by 4% to GBP2.98 million (at 31 December 2019: GBP2.87 million)

-- Net cash of GBP4,997,822 at 31 December 2020, an increase of GBP597,367 on the level at 31 December 2019 ( GBP4,400,455)

-- Profit before tax for the year to 30 June 2021 is expected to be in line with market expectations

Geoff Wicks, Chairman of Arcontech, said:

" The Board is pleased with Arcontech's progress in the first half of the year. While the effects of the COVID-19 pandemic have continued to overshadow the market we have grown revenue with the addition of an important new customer and a significant upgrade to an existing tier one customer. At the same time we have maintained good profit levels after investing in future growth. We believe we are in a good position to accelerate growth once market conditions improve.

Enquiries:

 
 Arcontech Group plc                        020 7256 2300 
 Geoff Wicks, Chairman and Non-Executive 
  Director 
 Matthew Jeffs, Chief Executive 
 
 finnCap Ltd (Nomad & Broker)               020 7220 0500 
 Carl Holmes/Simon Hicks 
 
 

To access more information on the Group please visit: www.arcontech.com

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

The interim report will only be available to view online enabling the Group to communicate in a more environmentally friendly and cost-effective manner.

Chairman's Statement

I was delighted to join the board of Arcontech as a Non-Executive Director in July 2020, before becoming Chairman in September 2020. I would like to thank Richard Last for his stewardship of the Company over the last thirteen years, overseeing the Company's transformation and growth to be highly profitable with an impressive blue-chip customer base.

In these uncertain times Arcontech has continued to perform well, with sound revenue growth but a reduction in profit before tax due to the effect of the investment in building the sales team which is expected to enhance future earnings. The market continues to be challenging with customer contact limited and decisions being delayed due to remote working. However, the enhanced sales team is making good progress growing the list of prospective new customers, which bodes well for the future.

Revenue was GBP1.54 million, up 4.7% from GBP1.47 million in the previous year. Profit before tax (PBT) was GBP506,237, 8% lower than the same period last year, reflecting the additional investment in sales capability. Costs continue to be under tight control. Adjusted profit before tax, which is PBT before the release of accruals for administrative costs in respect of prior years, was down 9% to GBP462,237.

Our strategy is to support our existing customers and to maximise opportunities to provide a wider range of services to them. At the same time we have invested in building our sales capability to grow our customer base globally. We also continue to focus on our desktop products to augment our server-side business.

The enlarged sales team has made good progress reaching out to potential new customers. The prevailing market conditions have meant that the sales cycle is taking much longer than in normal times. We are pleased with the progress made and are confident that growth will improve once we are in a more normal market.

Financing

Our cash position remains excellent, with cash balances of GBP4,997,822 at the end of the period, GBP597,367 above the level at 31 December 2019 and broadly the same as the balance of GBP5,006,969 at June 30, 2020, after paying GBP333,594 in dividends. This enables us to invest in the business, maintaining our larger sales team and developing our products.

Dividend

No interim dividend is proposed to be paid in respect of the half year. The Board expects to continue its policy of paying a dividend following the announcement of its full year results.

Employees

Our staff are now all working from home and I would like to thank them for their hard work adapting to this challenge. The Company has been able to continue to provide full support to existing customers, which has included performing software upgrades and helping with data centre moves whilst at the same time supporting proof of concept projects and progressing the development of new products.

Outlook

We expect conditions in the second half of the year to remain challenging. It seems unlikely that our sales team will have greater access to customers until at least the end of the year, however, we are confident that we will build on current growth once market conditions improve.

Geoff Wicks

Chairman and Non-Executive Director

GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

 
                                Note    Six months    Six months 
                                          ended 31      ended 31     Year ended 
                                          December      December        30 June 
                                              2020          2019           2020 
                                       (unaudited)   (unaudited)      (audited) 
                                               GBP           GBP            GBP 
 
 Revenue                                 1,542,816     1,473,651      2,955,314 
 
 Administrative costs                  (1,034,043)     (924,211)    (1,917,502) 
 
 
 Operating profit                4         508,773       549,440      1,037,812 
 
 Finance income                              8,442        16,573         29,914 
 
 Finance costs                            (10,978)      (14,166)       (26,757) 
 
 
 Profit before taxation                    506,237       551,847      1,040,949 
 
 Taxation                        6               -         9,734        176,734 
 
 
 
   Profit for the period 
   after tax                               506,237       561,581      1,217,703 
 
 
 Total comprehensive income                506,237       561,581      1,217,703 
 
 
 Profit per share (basic)                    3.82p         4.25p          9.22p 
 
 Adjusted* Profit per share 
  (basic)                                    3.49p         3.93p          8.56p 
 
 Profit per share (diluted)                  3.76p         4.17p          9.03p 
 
 Adjusted* Profit per share 
  (diluted)                                  3.43p         3.85p          8.39p 
 

All of the results relate to continuing operations and there was no other comprehensive income in the period.

* Before release of accruals for administrative costs in respect of prior years.

GROUP BALANCE SHEET

 
 
                                           31 December     31 December       30 June 
                                  Note            2020            2019          2020 
                                           (unaudited)     (unaudited)     (audited) 
                                                   GBP             GBP           GBP 
 Non-current assets 
 Goodwill                                    1,715,153       1,715,153     1,715,153 
 Property, plant and 
  equipment                                     15,697          17,084        19,316 
 Right of use asset               10           438,908         588,212       512,061 
 Deferred tax asset                            452,000         285,000       452,000 
 Trade and other receivables                   141,750         141,750       141,750 
 
 Total non-current 
  assets                                     2,763,508       2,747,199     2,840,280 
 
 Current assets 
 Trade and other receivables                   759,655         608,910       192,632 
 Cash and cash equivalents                   4,997,822       4,400,455     5,006,969 
                                        --------------  --------------  ------------ 
 
 Total current assets                        5,757,477       5,009,365     5,199,601 
 
 Current liabilities 
 Trade and other payables                    (643,512)       (694,215)     (655,907) 
 Deferred income                           (1,483,908)     (1,513,941)   (1,195,130) 
 Lease liabilities                10         (162,000)       (162,000)     (141,693) 
 
 Total current liabilities                 (2,289,420)     (2,370,156)   (1,992,730) 
 
 Non-current liabilities 
 Lease liabilities                10         (253,974)       (392,405)     (344,303) 
 
 Total non-current 
  liabilities                                (253,974)       (392,405)     (344,303) 
 
 Net current assets                          3,468,057       2,639,209     3,206,871 
 
 Net assets                                  5,977,591       4,994,003     5,702,848 
 
 Equity 
 Share capital                               1,661,314       1,651,314     1,651,314 
 Share premium account                          65,381          56,381        56,381 
 Shares to be issued                            31,642               -             - 
 Share option reserve                          206,797         145,352       188,639 
 Retained earnings                           4,012,457       3,140,956     3,806,514 
 
                                             5,977,591       4,994,003     5,702,848 
 
 

GROUP CASH FLOW STATEMENT

 
                                        Note    Six months    Six months       Year ended 
                                                  ended 31      ended 31          30 June 
                                                  December      December 
                                                      2020          2019             2020 
                                               (unaudited)   (unaudited)        (audited) 
                                                       GBP           GBP              GBP 
 
 
 
   Cash generated from operating 
   activities                            9     336,866       646,861            1,315,421 
 
 Tax recovered                           6     -             9,734                  9,734 
 
 Net cash generated from operating 
  activities                                   336,866       656,595            1,325,155 
 
 Investing activities 
 
 Interest received                             8,442         16,573        29,914 
 
   Purchases of plant and equipment              (1,482)       (5,772)           (12,750) 
 
 Net cash generated from investing 
  activities                                     6,960         10,801        17,164 
                                              ------------  ------------  --------------- 
 
 Financing activities 
 
 Proceeds from the exercise                    50,642        -             - 
  of options 
 
 Dividends paid                                (333,594)     (263,591)     (263,591) 
 
 Payment of lease liabilities                  (70,021)      (66,834)      (135,243) 
 
 Net cash used in financing 
  activities                                   (352,973)     (330,425)     (398,834) 
                                              ------------  ------------  --------------- 
 
 
   Net (decrease) / increase 
   in cash and cash equivalents                  (9,147)       336,971         943,485 
 
 Cash and cash equivalents 
  at beginning of period                         5,006,969     4,063,484     4,063,484 
 
 Cash and cash equivalents 
  at end of period                             4,997,822     4,400,455          5,006,969 
                                              ============  ============  =============== 
 

GROUP STATEMENT OF CHANGES IN EQUITY

 
                               Share                 Share                Shares         Share-based             Retained                Total 
                             capital               premium                 to be            payments             earnings 
                                                                          issued             reserve 
                                 GBP                   GBP                   GBP                 GBP                  GBP                  GBP 
 At 1 July 2019            1,651,314                56,381                     -              56,366            2,011,689            3,775,750 
 Total 
  comprehensive 
  income for 
  the 
  period                           -                     -                     -                   -              561,581              561,581 
 Dividends paid                    -                     -                     -                   -            (263,591)            (263,591) 
 Share-based 
  payments                         -                     -                     -              45,705                    -               45,705 
 At 31 December 
  2019                     1,651,314                56,381                     -             145,352            3,140,956            4,994,003 
---------------  -------------------  --------------------  --------------------  ------------------  -------------------  ------------------- 
 Total 
  comprehensive 
  income for 
  the 
  period                           -                     -                     -                   -              656,122              656,122 
 Share-based 
  payments                         -                     -                     -              52,723                    -               52,723 
 Realisation of 
  share option 
  reserve                          -                     -                     -             (9,436)                9,436                    - 
 At 30 June 
  2020                     1,651,314                56,381                     -             188,639            3,806,514            5,702,848 
---------------  -------------------  --------------------  --------------------  ------------------  -------------------  ------------------- 
 Total 
  comprehensive 
  income for 
  the 
  period                           -                     -                     -                   -              506,237              506,237 
 Exercise of 
  options                     10,000                 9,000                31,642                   -                    -               50,642 
 Transfer 
  between 
  reserves                         -                     -                     -            (33,300)               33,300                    - 
 Dividends paid                    -                     -                     -                   -            (333,594)            (333,594) 
 Share-based 
  payments                         -                     -                     -              51,458                    -               51,458 
 At 31 December 
  2020                     1,661,314                65,381               31,642*             206,797            4,012,457            5,977,591 
---------------  -------------------  --------------------  --------------------  ------------------  -------------------  ------------------- 
 

* At 31 December 2020 GBP31,642 had been received from an optionholder as subscription funds to acquire 37,301 Ordinary Shares in the Company. The shares were issued post reporting date on 25 January 2021.

NOTES TO THE FINANCIAL INFORMATION

1. The figures for the six months ended 31 December 2020 and 31 December 2019 are unaudited and do not constitute statutory accounts. The interim results have been prepared on a going concern basis using accounting policies which are consistent with International Financial Reporting Standards as adopted by the European Union and with the accounting policies adopted in the most recent annual financial statements to 30 June 2020.

2. The financial information for the year ended 30 June 2020 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 June 2020, which were prepared under International Financial Reporting Standards (IFRS) as adopted for use in the EU, applied in accordance with the provisions of the Companies Act 2006, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

3. Copies of this statement are available from the Company Secretary at the Company's registered office at 1(st) Floor 11-21 Paul Street, London, EC2A 4JU or from the Company's website at www.arcontech.com .

4. Operating profit is stated after release of accruals for administrative expenses in respect of prior years of GBP44,000 (31 December 2019: GBP42,500; 30 June 2020: GBP86,500).

5. Earnings per share have been calculated based on the profit after tax and the weighted average number of shares in issue during the half year ended 31 December 2020 of 13,259,206 (31 December 2019: 13,210,510; 30 June 2020: 13,210,510).

The number of dilutive shares under option at 31 December 2020 was 214,217 (31 December 2019: 256,341; 30 June 2020: 268,484). The c a lcu l a t i on of d il u t ed e a r n i n gs per sh a re assu m es c on v e rsi on of a ll po t e n t i a lly d i l u t ive o r d i na ry shares, all of w h i ch a r ise f r om sh a re op t i on s. A calculation is done to determine the number of shares that could have been acquired at the average market price during the period, based upon the issue price of the outstanding share options including future charges to be recognised under the share-based payment arrangements.

6. Taxation is based on the unaudited results and provision has been estimated at the rate applicable to the Company at the time of this statement and expected to be applied to the total annual earnings. No corporation tax has been charged in the period as any liability has been offset against tax losses brought forward from prior years. The tax credit represents the cash recovery of Research & Development tax credits during the period.

7. A final dividend in respect of the year ended 30 June 2020 of 2.5 pence per share (2019: 2.0 pence per share) was paid on 9 October 2020.

   8.   The Directors have elected not to apply IAS 34 Interim financial reporting. 
   9.   Cash generated from operations 
 
                                     Six months    Six months       Year ended 
                                       ended 31      ended 31          30 June 
                                       December      December 
                                           2020          2019             2020 
                                    (unaudited)   (unaudited)        (audited) 
                                            GBP           GBP              GBP 
 
 Operating profit                       508,773       549,440        1,037,812 
 
 Depreciation charge                     78,254        77,226          154,747 
 
 Non-cash share option charges           51,457        45,705           98,428 
 
 Lease interest paid                   (10,978)      (14,166)         (26,757) 
 
 Adjustment for adoption of 
  IFRS 16                                     -      (40,500)         (37,125) 
 
   (Increase)/decrease in trade 
   and other receivables              (567,023)     (345,035)           71,244 
 
 Increase in trade and other 
  payables                              276,383       374,191           17,072 
 
 
 Cash generated from operations         336,866       646,861        1,315,421 
 
 
 
 

10. Leases

As a lessee, under IFRS 16 the Group recognises right-of-use assets and lease liabilities for all leases on its balance sheet. The only lease applicable under IFRS 16 is the Group's office.

The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows:

 
                                    Right of   Prepayments        Lease       Income 
                                   use asset                  liability    statement 
                                         GBP           GBP          GBP          GBP 
 As at 1 July 2020                   512,061             -    (485,996)            - 
 
 Depreciation                       (73,153)             -            -     (73,153) 
 Interest                                  -             -     (10,978)     (10,978) 
 Lease payments                            -             -       81,000            - 
 
 
 Carrying value at 31 December 
  2020                               438,908             -    (415,974)     (84,131) 
                                 -----------  ------------  -----------  ----------- 
 
 
 
                                    Right of   Prepayments        Lease       Income 
                                   use asset                  liability    statement 
                                         GBP           GBP          GBP          GBP 
 As at 1 July 2019                         -             -            -            - 
 
 Recognised on adoption 
  of IFRS 16                         661,739      (40,500)    (621,239)            - 
 Depreciation                       (73,527)             -            -     (73,527) 
 Interest                                  -             -     (14,166)     (14,166) 
 Lease payments                            -             -       81,000            - 
 
 
 Carrying value at 31 December 
  2019                               588,212      (40,500)    (554,405)     (87,693) 
                                 -----------  ------------  -----------  ----------- 
 
 

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