TIDMCTP
RNS Number : 5413C
Castleton Technology PLC
18 June 2019
Castleton Technology plc
("Castleton", the "Group" or the "Company")
Preliminary Results
For the Year Ended 31 March 2019
Castleton Technology plc (AIM: CTP), the software and managed
services provider to the public and not-for-profit sectors,
announces its unaudited preliminary results for the year ended 31
March 2019.
Financial Highlights
-- Revenue up 13% to GBP26.4 million (FY18: GBP23.3 million) of
which 58% is recurring (an increase of GBP1.4 million over the
prior year). Adjusted EBITDA* up 24% to GBP6.3 million (FY18:
GBP5.1 million)
-- Adjusted EBIDTA* margin increased to 24% (FY18 22%)
-- Operating cashflow** up 25% to GBP6.5 million (FY18: GBP5.2 million)
-- Post exceptional items at GBP6.1 million (FY18: GBP4.5
million)
-- Operating cash conversion** of 103% (FY18: 101%)
-- Post exceptional items at 97% (FY18: 88%)
-- Total net debt reduced from GBP6.3*** million to GBP5.1 million
-- Basic EPS of 5.08 pence (FY18: 5.23 pence).
Operational Highlights
-- 50% of customers now taking more than one product or service, up from 40% in FY18
-- Secured significant multi-year and multi-product contracts throughout the year, including:
-- 4 year, GBP1.2 million contract with Dumfries and Galloway
Housing Partnership ("DGHP") for the provision of a full end-to-end
managed service
-- Subsequent GBP0.4 million contract to provide DGHP with a
Unified Communications solution
-- 5 year, GBP1.3 million contract with Connect Housing
Association ("Connect") for Castleton's full suite of integrated
software solutions
-- Existing customer New Gorbals, who had the complete solution
set, added one of Castleton's newly launched solution's, Asset
Management
-- Launch of Castleton.DIGITAL, a self-service customisable digital delivery platform
-- Acquisition of Deeplake Digital Limited ("Deeplake"),
provider of digital technology for landlord and tenant
communication in the social housing sector, for cash consideration
of GBP1.8 million
-- Acquisition of Castleton India (previously known as CarbonNV
InfoLogic India Private Limited) for a total consideration of
GBP0.35 million. Castleton India, which has offices in Bangalore
and Vadodara, India, previously provided additional development
capability to the Group via a service agreement. The acquisition
has enabled the Group to secure the additional development
capability and skills within the company on a more permanent
basis.
-- Acquisition of exclusive and perpetual licence in relation to
the platform upon which Castleton's modelling solution is based,
for GBP1.6 million in cash and shares.
Dean Dickinson, CEO of Castleton, said:
"It has been another year of significant progress for Castleton,
delivering strong organic growth at both revenue and EBITDA level
underpinned by healthy cash generation. This has not only resulted
in the continued reduction in net debt, but it has also enabled
operational growth through the acquisition of Deeplake, the
perpetual licence for our modelling solution, the launch of new
digital solutions and expanded development capabilities with
Castleton India.
A number of milestone projects are now fully-live and
operational with three early adopter sites for integrated
solutions. These combined customer references have been a major
contributor to us winning the new integrated solutions contract in
January with Connect. The early adopters and this new contract
demonstrate the strength of our proposition, our ability to
cross-sell and the trust our customers have in our capabilities to
deliver on their vision for complete digital transformation."
*Earnings for the year from continuing operations before net
finance costs, tax, depreciation, amortisation, exceptional costs
and share based payment charges.
** Pre-exceptional items
*** Excluding GBP1.6 million owed in respect of exercise of
options held by MXC Guernsey Limited, as announced on 21 February
2018
The Annual Report and Accounts for the year ended 31 March 2019
will be posted to shareholders at least 21 days prior to the
AGM.
Please see a video of the Company's results here
https://plcwebcast.uk/ctpfyresultsjune2019
Enquiries:
Castleton Technology plc Tel. +44 (0)845 241 0220
Dean Dickinson, Chief Executive
Officer
Haywood Chapman, Chief Financial
Officer
Tel. +44 (0)20 7220 0500
finnCap Ltd
Jonny Franklin-Adams / Simon Hicks
Tel. +44 (0)20 3405 0205
Alma PR
Rebecca Sanders-Hewett/ Helena
Bogle
About Castleton Technology plc
Castleton Technology plc is a leading supplier of complementary
software and managed services to the public and not-for-profit
sectors. The Group is a 'one stop shop', providing integrated
housing systems via the Cloud, working in partnership with its
customers and resellers to help drive efficiencies whilst improving
controls and customer service. www.castletonplc.com
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Chairman's Statement
Excellent Financial Results
I am very pleased to be able to report on another year of
excellent progress for Castleton. We have continued to grow our
revenues organically, recording an increase of 7% in the year to 31
March 2019 ("FY19"). We also increased recurring revenues in
absolute terms by GBP1.4 million and these now stand at 58% of
total revenue. Furthermore, despite continued investment in the
business, particularly in relation to our software products, we
have been able to increase our Adjusted EBITDA margin from 22% in
FY18 to 24% in FY19.
Cash generation has continued to be impressive, giving us the
confidence to invest over GBP0.6 million in refreshing our data
centres in order to increase capacity for future growth, especially
in cloud related services. The level of cash generation has also
allowed us to reduce net debt by GBP1.2 million and enabled our
acquisition of Deeplake Digital, a provider of digital technology
for landlord and tenant communication in the social housing sector,
thereby bolstering our product offering. During the year we
acquired the perpetual licence for our modelling solution and also
an offshore development facility in India which, in conjunction
with our UK development teams, will allow us to bring new products
to market more quickly.
The year under review has also seen early success in our
strategy of cross-selling into our customer base, evidenced by the
fact that the number of customers taking two products or more has
increased to 50% from 40% in the prior year.
Market Focus
We continue to focus on the social housing sector and adjacent
markets, such as the outsourced maintenance contractor business.
The breadth and level of integration of our software offerings and
associated expertise provides our customers with the full range of
technology and services that they require. This focus, allied with
our increased development capability, means that we can respond to
our customers' needs and bring new and exciting products to market
in a short timescale. One such offering is our artificial
intelligence ("AI") capability where we have linked voice
recognition devices, such as Amazon's Alexa, to our systems, which
will allow our customers to dramatically change the way they
interact with tenants and thereby increase the efficiency of their
operations.
Dividend
This is the third year in a row in which cash generation has
been c. 100% of adjusted EBITDA. Given this continued strong cash
generation, as a Board we are pleased to propose a maiden dividend
of 1p per share, subject to shareholder approval at the Company's
AGM, which will be held on 19 August 2019. The dividend will be
payable on 23 September 2019 to shareholders on the register as at
23 August 2019 and with a corresponding ex-dividend date of 22
August 2019. We will continue to review the level of dividend and
intend to maintain a progressive dividend strategy.
An Enabling Culture
Castleton is a young, dynamic and exciting business with a
culture built on focus, pride and teamwork. The Board believe that
all employees should be able to share in the success of Castleton
and during the year two initiatives were launched in order to allow
this to happen. Firstly, we introduced a UK Sharesave scheme which
was well received with 45% of eligible employees investing in the
scheme. Secondly, we introduced a bonus scheme so that, subject to
the achievement of targets, each employee in Castleton has the
possibility to benefit from the continued growth and success of the
Company.
As a Board we seek to engage regularly with staff, with Board
meetings held at our various offices, and any members of staff are
encouraged to approach me with any ideas or concerns they may have.
In addition, we have launched employee feedback surveys (eNPS) with
collaborative workshops held to increase engagement and address key
themes arising from the surveys.
Outlook
The financial year ended 31 March 2019 has been another year
where our strategy to build a cash generative, high recurring
revenue business with good levels of organic growth has been
successfully executed. The one area that has not yet lived up to
our expectations is our Australian Operation (reported within our
Software Solutions division) - we have taken action to address
this, but it has had a slight impact on our outlook for next
year.
With our sector focus and breadth of product offering, we
continue to see enormous potential to become the supplier of choice
for software and IT services in the social housing market. There
remains a significant cross-sell opportunity across our existing
customer base as 50% of our c.600 housing association customers
only take one of our products or services. As we continue to
enhance our development capability and increase and invest into our
product set in order to allow greater cloud usage, we believe we
will be able to further capitalise on our already established
position within the social housing sector.
To maximise this opportunity, post year end, we decided to merge
our Software Solutions and Managed Services divisions into a single
entity and this integration will be complete by the end of June
2019. The primary drivers for this change are to set the right
technological trajectory for Castleton, in recognition of the fact
that customers are moving to a "Cloud First" deployment strategy,
to maximise the cross-sell opportunity, to focus on higher margin
revenue and to ensure our customers receive integrated products and
services with world class support.
The combination of a healthy pipeline of new business, together
with our new development capabilities and our improved
organisational structure, give me confidence for the year ahead and
I expect that we will show continued progress in both our financial
and operational metrics when we next report.
David Payne
Chairman
Chief Executive's Review
Overview
Castleton have enjoyed another year of significant progress
throughout the financial year ending 31 March 2019, demonstrating
strong organic growth at both revenue and EBITDA level. Excellent
cash generation has not only resulted in the continued reduction in
net debt, but it has also enabled operational growth through the
acquisition of Deeplake Digital, the launch of new digital
solutions and expanded development capabilities with Castleton
India.
We have seen some milestone projects go fully-live and
operational with our three early adopter sites for integrated
solutions; Cluid Housing, New Gorbals Housing Association and
Circle Housing. These combined customer references have been a
major contributor to us winning a brand-new integrated solutions
contract valued at GBP1.3 million, with Yorkshire based Housing
Association Connect Housing. This five-year contract demonstrates
the strength of our proposition, our ability to cross-sell and the
trust our customers have in our capabilities to deliver on their
vision for complete digital transformation.
Our continued investment in research and development enables
Castleton to keep ahead of the curve and meet the needs of our
market. The addition of our Indian development capabilities means
we can bring new solutions to the market faster and more cost
effectively. The delivery of our Castleton.DIGITAL solution, which
launched in September 2018, is an excellent example of the Indian
operation's performance.
We have continued to deliver enhancements across our solutions
portfolio and service offering. The market we operate in is fast
embracing digital means to engage with tenants and as a result, we
launched several new solutions. This includes embarking on a
first-of-its kind project with our customer Housing Solutions to
introduce Artificial Intelligence technology into tenants' homes.
Add to this our portal and app platform, Castleton.DIGITAL, plus
the acquisition of Deeplake's two-way SMS technology, and we have
the strongest portfolio of digital solutions that support the
market's increasing demand for digital self-service.
Just as digital self-service has become an integral part of our
customers' IT transformation strategy, we have also seen Cloud
delivery becoming more significant, with the level of interest
shown by our customers increasing. After the year end, we have
therefore taken the decision to merge the two divisions (Software
Solutions and Managed Services) to create a truly 'one Castleton'
structure. This integration will be completed by the end of June
2019, with plans to deliver a unified, seamless and enhanced
customer experience.
Our renewed customer-centric approach is evident by the
stability we have gained across our software support services over
the last 12 months. We have reduced open support tickets by 80%
over the course of the year and delivered a customer satisfaction
level of 96.3% against service level agreements.
Castleton have undertaken a significant exercise to increase our
employee engagement. This has included the launch of a UK Sharesave
scheme, with 45% of eligible employees enrolling during its launch
in August 2018. We intend to make this available for new Castleton
employees in August 2019. Further to this, we launched a company
bonus scheme during the year based upon individuals achieving key
performance metrics. This will pay out for 2019 performance. We
have also started to measure employee engagement through Employee
Net Promoter Score, where we have seen a 36-point improvement in
employee satisfaction.
The focus during the year has also continued to be on optimising
the business, strengthening the management team and business
platform and expanding our product offering which will in turn
allow the Group to grow and maximise the opportunities available in
our chosen market.
Our Market and What We Do
The markets in which we operate are focused around public sector
and not-for-profit social housing but also include the contractors
who provide repairs services to the social housing providers.
Castleton now has ten offices globally; seven in the UK, one in
Australia as our operations grow following the acquisition of
Kinetic in the prior year and two in India. This demonstrates our
ability to grow and scale our business in new geographies.
Our Software Solutions provides all key business processes to
social landlords covering everything from tenant engagement, rent
collection, financial planning and control, document management and
repairs management. All key processes are available to be utilised
on a mobile platform via apps or digital engagement. The range of
solutions provides customers with significant improvements in
service, performance and insight, as well as delivering a solid
return on investment.
Our Cloud Delivery capability offers a wide range of IT
infrastructure solutions which support an organisation's business
objectives, including helping to drive efficiencies, manage legacy
architectures or providing customers and staff with the latest
social, mobile and cloud technologies. We also have the capability
to provide a full IT outsource service where we become the Housing
Associations' IT capability.
Trading Results
Revenue for the year showed an increase of 13.3% to GBP26.4
million (2018: GBP23.3 million) with 58% of revenue being recurring
in nature (2018: 60%). Adjusted EBITDA* showed a stronger
performance, improving by 23.5% to GBP6.3 million (2018: GBP5.1
million), reflecting the Company's operational gearing and ability
to scale profitably.
Operating cash conversion was 103% of adjusted EBITDA* (2018:
101%) and 98% of adjusted EBITDA* post exceptional costs (2018:
91%), demonstrating the cash generative nature of the business. The
cash generated enabled a reduction in net debt of GBP1.2 million to
GBP5.1 million as well as funding the acquisition of Deeplake
Digital and Castleton India. The earnings per share at a basic
level was 5.08p, compared to earnings per share of 5.23p in the
previous year, with the higher prior year figure due to significant
exceptional credits.
*Earnings for the year from continuing operations before net
finance costs, tax, depreciation, amortisation, exceptional costs
and share based payment charges.
Deeplake
On 10 January 2019, the Group acquired Deeplake, a leading
provider of Communications Management Software to the social
housing sector, for a cash consideration of GBP1.8 million financed
through a combination of cash generated in the year and an increase
in our banking facilities.
India
On 20 February 2019, the Group acquired Castleton India
(previously known as CarbonNV InfoLogic India Private Limited), for
a total consideration of GBP0.35 million comprising GBP0.15 million
of cash consideration and the issue of 200,331 shares in the
Company.
Modelling Solution Licence
During the year, we also acquired an exclusive and perpetual
licence in relation to the platform upon which Castleton's
modelling solution is based, for GBP1.6 million in cash and shares,
which has enhanced our margins on this product.
Operational Review
During the year, we have continued to make improvements to the
quality of the business processes, people, structure and control.
We have also launched new products, both through our own IP and
partnering arrangements. I am therefore confident that the organic
growth demonstrated during the current year will continue as we
further cross sell into the customer base. Our contracted backlog
of revenue has grown by 12.6%, which gives us good forward
visibility of revenue.
The increase in customer revenues was primarily driven by the
addition of new customers and through cross-selling of products and
/ or services into the Group's existing base. During the year the
number of customers who have two or more of our products increased
to 50% from 40% in 2018. Whilst this shows good progress, it also
means that 50% (2018: 60%) of our customer base still uses just one
product, providing a very strong opportunity for further organic
growth.
The individual value of new contracts continues to grow. New
contracts signed during the year include a five-year contract with
Connect Housing with a total contract value of GBP1.3 million for
the provision of the entire suite of our software products and a
full end to end managed service contract with Dumfries and Galloway
Housing Partnership (DGHP) worth GBP1.2 million over 4 years.
Furthermore, we extended the DGHP contract by winning a second
tender for a Unified Communications platform in February 2019 worth
GBP0.4 million.
Following the acquisition of Kinetic Information Systems Pty Ltd
("Kinetic") in December 2017, we recruited a new General Manager to
head up the Castleton business in Australia. Unfortunately, we had
significant execution issues that resulted in the General Manager
leaving the business in October 2018 after 6 months in post. In
addition, the vendors of the Kinetic business decided to move on
before the 2 year earn out period for personal reasons thereby
foregoing deferred consideration of AUS$ 0.5 million. We then took
the action of promoting resource from within the business in
Australia and we are pleased with the last quarter of trading.
In order to increase our ability to create further innovative IP
solutions we entered into a service agreement with an Indian
development capability at the start of the financial year. The
success of this working relationship led to the acquisition of this
business, as noted above. This has allowed us to bring new
solutions to the market quicker and at a reduced cost when compared
to UK development costs.
Current Trading and Outlook
I am delighted to report another year of strong results, with
increased revenues and EBITDA and the completion of two
acquisitions, augmenting the Group's customer base and capability.
Since I arrived mid-way through the financial year ending 31 March
2017 (FY17), we have successfully executed on our growth strategy,
growing revenues from GBP20.3m in FY17 to over GBP26m for the year
just ended. The market presents us with as much opportunity now as
it did then and that, together with the acquisitions made in the
intervening period, will allow us to continue to execute
successfully on the growth strategy.
The benefits of the extensive changes we have made to the
business are now increasingly showing through in our results and,
combined with the internal reorganisation that we have just done,
we are now in a significantly better position to grow and increase
profitability. Competition remains strong, particularly in managed
services, so referenceability is important, which we can
increasingly provide.
Trading since the end of the financial year has been in line
with expectations and we expect to see seasonality between the two
halves of the financial year, with earnings and cash flows being
stronger in the second half than the first half.
Making the best use of technology remains a key focus for the
social housing sector and we are well placed to deliver the digital
solutions our customers and end-users need, both now and in the
future. We will continue to invest in our technology platform and
solution set and look to the future with confidence.
Dean Dickinson
Chief Executive
Chief Financial Officer's review
I am pleased to present this report as Chief Financial
Officer.
Principal events and overview
The year ended 31 March 2019 has again been one of growing the
business organically, demonstrating operational leverage as
recurring revenues continue to grow and growing the business in
terms of offerings and capability through acquisitions. Organic
growth which excludes revenue of GBP0.3 million and adjusted
EBITDA* of GBP0.2 million for Deeplake, has been 7.3% at the
revenue level and 13.0% at the adjusted EBITDA* level,
demonstrating, as in prior years, continued operational
leverage.
Recurring revenues in the year increased from GBP14.0 million in
2018 to GBP15.4 million in 2019 representing 58% (2018: 60%) of
total revenue.
Cash generation has been pleasing with cash generated from
operations during the year of GBP6.5 million (2018: GBP5.2
million), thereby representing 103% operating cash conversion. The
resulting cash flow has allowed us to reduce net debt to GBP5.1
million (including convertible loan notes and deferred
consideration) from GBP6.3 million at the end of the prior year.
The balance of the loan from Barclays Bank stands at GBP4.0 million
at the end of the year following an increase in the facility of
GBP1.5 million for the acquisition of Deeplake.
Trading results and acquisitions
The trading results for the year comprise a full year of trading
for all entities acquired in the prior years and results from two
acquisitions in the year, which is a continuation of the strategy
started in 2014 of bringing together a number of best of breed
software and managed services providers to the social housing
market.
The Company acquired Deeplake, a provider of two-way
communication technologies and associated software for a cash
consideration of GBP1.8 million on 10 January 2019. Deeplake
contributed GBP0.3 million of revenue and GBP0.2 million of profit
before tax in the year.
We also acquired Castleton India on 20 February 2019 for a total
comprising of 200,331 ordinary shares of 2 pence in the capital of
the Group ("Ordinary Shares") and GBP156,000 of cash, a total
consideration of GBP351,000.
Revenue and gross profit
Revenue amounted to GBP26.4 million (2018: GBP23.3 million).
GBP15.0 million was generated by the Software Solutions division
(2018: GBP12.4 million) and GBP11.4 million (2018: GBP10.9 million)
was generated by the Managed Services division. As we see the
services offered by the Managed Services division, namely Cloud
delivery becoming more significant going forwards and the level of
interest shown by our customers increasing in this area, we took
the decision post year end to merge the two divisions to create a
truly 'one Castleton' structure. This integration will be completed
by the end of June 2019 with the business operating from a single
entity which will assist in delivering a unified, seamless and
enhanced customer experience.
Recurring revenue represents 58.3% of total revenues (2018:
60.1%) although recurring revenues increased by GBP1.4 million in
absolute terms to GBP15.4 million, up from GBP14.0 million in 2018.
The decrease in percentage of recurring revenue is due to the
stronger performance of professional services and other one-off
revenue items in the year.
Gross profit amounted to GBP19.0 million (2018: GBP16.1
million), representing a gross margin of 72% (2018: 69%).
Administrative expenses including exceptional items
The administrative expenses of GBP17.2 million (2018: GBP14.8
million) were incurred in the running of the business and include
the cost of the Board and its advisors, including the cost of
occupancy, back office support services, and the fees associated
with maintaining the AIM listing as well as amortisation of GBP3.2
million (2018: GBP3.0 million).
Exceptional costs of GBP0.3 million arising in the year (2018
credit of GBP0.8 million) relate to acquisition related costs for
Deeplake, Castleton India and restructuring costs for Kinetic
(which had been acquired at the end of the prior year). The credit
in 2018 related to restructuring activities undertaken in the year,
offset by the release of exceptional provisions made in prior
periods.
Adjusted EBITDA*
The adjusted EBITDA for the year amounts to GBP6.3 million
(2018: GBP5.1 million).
The cost in the year for the plc Board and its advisors was
GBP1.7 million (2018: GBP1.4 million). Adjusted trading EBITDA was
therefore GBP8.0 million (2018: GBP6.5 million).
Key Performance Indicators ('KPIs')
On a monthly basis, the Directors review revenue, operating costs, cash
and KPIs to ensure the continued growth and development of the Group.
Primary KPIs for 2018 and 2019 were: Year to 31 March 2019 Year to 31 March 2018
GBP'000 GBP'000
---------------------------------------- ---------------------- ----------------------
Total revenue 26,357 23,279
Recurring revenue 15,370 13,996
Gross Margin % 72% 69%
Adjusted trading EBITDA* 8,011 6,468
Adjusted EBITDA* 6,325 5,115
Adjusted EBITDA* margin 24.0% 22.0%
Operating profit 1,492 2,142
Cash generated from operations 6,502 5,177
Cash conversion ratio (Cash generated
from operations/Adjusted EBITDA*) 103% 101%
Net debt excluding deferred
consideration and loan notes 2,704 2,840
Net debt including deferred
consideration and loan notes 5,079 6,301
Average headcount (number) 177 169
Adjusted EBITDA* per head 35.7 30.3
---------------------------------------- ---------------------- ----------------------
*Adjusted EBITDA is defined as; Earnings for the year from continuing
operations before net finance costs, tax, depreciation, amortisation,
exceptional costs and share based payment charges. Adjusted Trading
EBITDA is as previously defined, however earnings from the year are
stated before Group costs (i.e. costs of plc Board and its advisors)
Finance income and costs
Finance income represents the interest earned on deferred income
from the sale of the consulting business sold in 2015, and finance
costs comprise interest payable on bank borrowings and the interest
and unwind of discount on the Kypera Loan Notes. Finance income and
costs amounted to GBP0.01 million (2018: GBP0.02 million) and
GBP0.3 million (2018: GBP0.3 million) respectively.
Profit for the year attributable to the owners of the parent
company
The Group profit after tax for the year to 31 March 2019 was
GBP4.1 million (2018: profit of GBP4.2 million). This comprises
profit before tax of GBP1.2 million (2018: profit of GBP1.8
million), which includes the finance income of GBP0.01 million
(2018: GBP0.03 million), and a tax credit of GBP2.9 million (2018:
GBP2.3 million) arising from R&D tax credits, the unwind of
deferred tax recognised on intangible assets and the recognition of
a deferred tax asset relating to unused capital allowance.
IFRS 15
IFRS 15, Revenue from Contracts with Customers, has been fully
adopted during the year.
IFRS 15 has had a significant impact on revenue recognition in
technology related companies and specifically software companies,
so we have undertaken significant work in preparing for the
implementation of this standard. We have taken account of adoption
of the standard by similar companies and enlisted the assistance of
our advisors in developing our policy. Overall, we were already
largely compliant with the requirements of the standard and the
impact on our reported revenue for the year was a reduction of
GBP0.1 million and an insignificant change to adjusted EBITDA*. The
impact on the opening net asset position was a reduction of GBP0.5
million before tax.
Earnings per share
Earnings per share at a basic level were 5.08p, compared to
earnings per share of 5.23p in the previous year.
Cash flow, funding and investment
Cash generated from operations during the year was very solid at
GBP6.5 million (2018: GBP5.2 million), thereby representing a third
year in a row with c.100% operating cash conversion. Working
capital decreased by approximately GBP0.2 million (2018: decrease
of GBP0.1 million).
Net of cash acquired, GBP2.0 million of cash was used in
business combinations with GBP1.8 million used for the acquisition
of Deeplake. A further GBP0.2 million for the acquisition of
Castleton India (2018: GBP1.1 million for Kinetic) was funded
through cash generated by the business. Over the course of the
year, GBP0.6 million (2018: GBP0.6 million) of the GBP1.8 million
due under the terms of the Agile Licence was paid. The remaining
balance of Agile deferred consideration at the year-end was GBP0.2
million and this was paid in April 2019.
During the year, the Group repaid GBP0.8 million of the Barclays
term loan in line with the facility agreement (2018: GBP1.0
million). In January 2019, the remaining GBP2.5 million facility
was re-financed to a GBP4.0 million facility, the GBP1.5 million
additional facility being used to fund the GBP1.8 million
acquisition of Deeplake as well as assist in the cash requirements
for the acquisition of Castleton India. As at the balance sheet
date, GBP4.0 million (2018: GBP3.3 million) of term loan was
outstanding. Since the initial bank loan was put in place in 2015,
the financial strength of the company has increased considerably
which assisted in lowering the margin paid on our borrowings by 25
basis points.
During the year the Group invested over GBP0.6 million in
customer related capital expenditure and infrastructure in our
leased datacentre sites, providing increased capacity for future
contract expansion as well as improving the capabilities offered to
existing customers. Whilst we do not expect to incur similar
capital expenditure amounts over the coming year, our stable and
strong cash flows allow us to invest where necessary to continue to
grow the business. The Group also invested in software research and
development, capitalising GBP0.5 million of R&D expenditure
during the period (2018: GBP0.4 million).
During the year, on 3 April 2018, the Group paid GBP1.7 million
to MXC in full settlement of the MXC Scheme and no further amounts
are due to MXC.
Overall increase in funds in the year of GBP0.9 million (2018:
GBP0.2 million) gave a net positive cash position at the balance
sheet date of GBP1.4 million (2018: GBP0.5 million).
Dividend
After we stated last year that we would look to implement a
progressive dividend policy, I am delighted to announce a maiden
dividend of 1p per share, subject to shareholder approval at the
Company's AGM, which will be held on 19 August 2019. The dividend
will be payable on 23 September 2019 to shareholders on the
register as at 23 August 2019 and with a corresponding ex-dividend
date of 22 August 2019.
Deferred income
Deferred income arises where revenue is invoiced ahead of
delivery of performance obligations and therefore recognition of
revenue. This is common in software maintenance, hosting, managed
services and software subscription agreements. Invoicing is largely
quarterly, half yearly or annually in advance and therefore
deferred income levels fluctuate throughout the year. At 31 March
2019 deferred revenue was GBP9.2 million (2018: GBP7.8 million) and
of the increase of GBP1.4 million, GBP1.3 million is due to the
adoption of IFRS 15 whereby if implementation revenues are not
considered to be a distinct performance obligation, they are
recognised over the contract term. There has been an associated
increase in deferred costs of GBP0.8m.
Going Concern
The Directors have prepared detailed cash flow projections
including sensitivity analysis on key assumptions. The Group is
forecasting significant free cash flow and therefore the
projections prepared show that not only should the Group be able to
operate within the level and conditions of available funding, but
also that net debt will be reduced over the coming year. Based on
the funding available, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Accordingly, the Group continues to adopt the going concern
basis in preparing its consolidated financial statements.
Haywood Chapman,
Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2019
Year ended Year ended
31 March 2019 31 March
GBP000 2018
Note GBP000
Revenue 26,357 23,279
Cost of sales (7,319) (7,211)
------------------------------------------------------------------------------ ---- ----------------- -------------
Gross profit 19,038 16,068
Administrative expenses (17,238) (14,770)
Exceptional charges 3 (319) (576)
Exceptional credits 3 11 1,420
Operating profit 1,492 2,142
Finance income 5 13 26
Finance costs 5 (313) (340)
------------------------------------------------------------------------------ ---- ----------------- -------------
Profit on ordinary activities before taxation 1,192 1,828
Income tax credit 6 2,904 2,295
------------------------------------------------------------------------------ ---- ----------------- -------------
Profit for the year attributable to owners of the parent company 4,096 4,123
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Foreign operations - foreign currency translation differences 25 41
Total comprehensive income for the year attributable to owners of the parent
company 4,121 4,164
------------------------------------------------------------------------------ ---- ----------------- -------------
Earnings per share
Basic earnings per share 7 5.08p 5.23p
------------------------------------------------------------------------------ ---- ----------------- -------------
Diluted earnings per share 7 4.81p 5.00p
------------------------------------------------------------------------------ ---- ----------------- -------------
Non-GAAP measure: Adjusted EBITDA
Operating profit 1,492 2,142
Depreciation and amortisation 3,691 3,333
---------------------------------- -------- ----------
EBITDA 5,183 5,475
Share-based payments 834 484
Exceptional credits 3 (11) (1,420)
Exceptional charges 3 319 576
---------------------------------- -------- ----------
Adjusted EBITDA (*) 6,325 5,115
---------------------------------- -------- ----------
*Earnings for the year from continuing operations before net
finance costs, tax, depreciation, amortisation, exceptional costs
and share based payment charges.
Consolidated Balance Sheet
As at 31 March 2019
31 March 31 March
2019 2018
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 8 34,010 32,075
Property, plant and equipment 9 1,427 872
Trade and other receivables 10 288 250
Deferred tax asset 6 3,116 1,462
38,841 34,659
------------------------------------ ---- -------- --------
Current assets
Inventories 70 72
Trade and other receivables 10 8,408 6,385
Current income tax receivable 1,189 516
Cash and cash equivalents 11 1,389 510
------------------------------------ ---- -------- --------
11,056 7,483
------------------------------------ ---- -------- --------
Total assets 49,897 42,142
------------------------------------ ---- -------- --------
Equity and liabilities
Equity attributable to owners of
the parent
Share capital 1,681 1,628
Share premium account 191 17,006
Equity reserve 143 251
Translation reserve 66 41
Merger reserves 7,966 7,966
Other reserves 50 -
Accumulated profit/(loss) 15,209 (8,383)
------------------------------------ ---- -------- --------
Total equity attributable to the
owners of the parent 25,306 18,509
------------------------------------ ---- -------- --------
Liabilities
Current liabilities
Trade and other payables 12 13,929 11,080
Borrowings 13 1,342 1,008
Deferred consideration 15 150 592
Liability in respect of MXC Scheme
settlement - 1,662
Provisions 156 121
15,577 14,463
------------------------------------ ---- -------- --------
31 March 31 March
2019 2018
Note GBP000 GBP000
Non-current liabilities
Trade and other payables 12 1,304 1,252
Borrowings 13 2,751 2,342
Convertible loan notes 14 1,883 2,378
Deferred consideration 15 - 143
Deferred taxation liabilities 6 2,952 3,055
Provisions 124 -
------------------------------------ ---- -------- --------
9,014 9,170
------------------------------------ ---- -------- --------
Total liabilities 24,591 23,633
------------------------------------ ---- -------- --------
Total equity and liabilities 49,897 42,142
------------------------------------ ---- -------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 March 2019
Attributable to the owners of the Parent
Company
Called Share Equity Merger Translation Other Accum Total
up premium reserve reserve reserve reserve (Loss)/ equity
share account (a) (b) (c) (d) profit
capital
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2017 1,625 16,995 2,919 7,966 - - (13,996) 15,509
Profit for the period - - - - - - 4,123 4,123
Other comprehensive
income - - - - 41 - - 41
Total comprehensive
income - - - - 41 - 4,123 4,164
Transactions with
owners
in their capacity as
owners:
--------- --------- --------- --------- ------------ --------- --------- --------
Share based payments - - - - - - 484 484
Waiver of Opus loan
notes - - (392) - - - 392 -
Exercise of warrants 3 11 - - - - - 14
Settlement of MXC
warrants - - - - - - (1,662) (1,662)
Settlement of Equity
reserve - - (2,276) - - - 2,276 -
------------------------ --------- --------- --------- --------- ------------ --------- --------- --------
At 31 March 2018 1,628 17,006 251 7,966 41 - (8,383) 18,509
Profit for the period - - - - - - 4,096 4,096
Other comprehensive
income - - - - 25 - - 25
------------------------ --------- --------- --------- --------- ------------ --------- --------- --------
Total comprehensive
income - - - - 25 - 4,096 4,121
IFRS 15 cumulative
adjustment
(j) - - - - - - (426) (426)
Transactions with
owners
in their capacity as
owners:
Share based payments - - - - - - 834 834
Shares issued to Brixx
International (e) 29 1,157 - - - - - 1,186
Conversion of MXC loan
notes (f) 15 617 (108) - - - 108 632
Shares issued to
CarbonNV
Infologic India (g) 4 191 - - - - - 195
Exercise of share
options
(h) 5 55 - - - - 60
Capital Reduction (i) - (18,835) - - - - 18,835 -
Tax relating to items
recognised
directly in equity - - - - - - 145 145
Obligation to issue
shares
on exercise of options - - - - - 50 - 50
------------------------ --------- --------- --------- --------- ------------ --------- --------- --------
At 31 March 2019 1,681 191 143 7,966 66 50 15,209 25,306
------------------------ --------- --------- --------- --------- ------------ --------- --------- --------
(a) Equity reserve
The equity reserve consists of the equity component of
convertible loan notes that were issued as part of the
consideration for past acquisitions less the equity component of
instruments converted or settled.
The fair value of the equity component of convertible loan notes
issued is the residual value after deduction of the fair value of
the debt component of the instrument from the face value of the
loan note.
The GBP143,000 balance at 31 March 2019 relates to the loan
notes issued for the purchase of Kypera Holdings Limited.
(b) Merger reserve
The merger reserve arose from the acquisition of Redstone
Communications Limited (GBP216,000) and Maxima Holdings Limited
(formerly Maxima Holdings plc) (GBP7,750,000) and represents the
difference between the value of the shares acquired (nominal value
plus related share premium) and the nominal value of the shares
issued.
(c) Translation reserve
On consolidation, the balance sheets of Castleton Technology Pty
Ltd (formerly Kypera Australia Pty Ltd) and Kinetic Information
Systems Pty Ltd are translated into sterling at the rates of
exchange ruling at the balance sheet date. Income statement Items
and cash flows are translated into sterling at rates approximating
to the foreign exchange rates at the date of the transaction.
Exchange gains or losses arising from the consolidation of these
two Australian companies are recognised in the translation
reserve.
(d) Other reserves
Other reserve movements were share options exercised but not yet
registered - see section (h) below.
(e) Shares issued to Brixx International
During the period, the Company issued a total of 1,432,706 new
ordinary shares of 2 pence each to Brixx International Limited at a
price of 82.75 pence per ordinary share, in respect of the
acquisition of the exclusive, perpetual and assignable licence in
relation to the Castleton Strategic Modelling (formerly "Brixx")
platform ("the Asset Purchase"), further development of the
platform and settlement of pre Asset Purchase licence fees
payable.
The consideration for the Asset Purchase was GBP1,686,000, of
which GBP1,186,000 was satisfied by the issue of new ordinary
shares of 2 pence each and GBP500,000 was paid in cash on 2 July
2018. The cash element has been included in "Purchase of intangible
assets" in the Consolidated Cash Flow Statement.
(f) Conversion of MXC Loan notes
On 9 August 2018, MXC Guernsey Limited, a wholly owned
subsidiary of MXC Capital Limited ("MXC") served a conversion
notice with respect to the remaining convertible loan notes
("CLNs") it held, together with the accrued interest, amounting to
GBP632,000 in total.
The CLNs were converted at 85.6 pence per ordinary share of 2
pence each in the capital of the Company therefore 738,896 new
ordinary shares of 2 pence were allotted to MXC on 17 August
2018.
(g) Shares issued to the owners of CarbonNV InfoLogic India
Private Limited
On 20 February 2019 the Company issued 200,331 ordinary shares
of 2 pence in the capital of the Company ("Ordinary Shares") and
paid cash of GBP154,678 (total consideration of GBP350,000) for the
acquisition of Castleton India (previously known as CarbonNV
InfoLogic India Private Limited).
(h) Exercise of share options
On 29 August 2018, Haywood Chapman, Chief Financial Officer,
exercised 271,000 options over new ordinary shares of 2 pence each
in the capital of the Company, at an exercise price of 22 pence per
ordinary share.
On 28 March 2019 options in respect of 66,225 shares of 2 pence
each were exercised at an exercise price of 75.5 pence per share
and application made for admission to trading. The obligation to
issue the shares has been recognised in other reserves (see (d)
above), and on 1 April 2019 the shares were registered and
issued.
(i) Capital reduction
On 23 October 2018, the High Court of Justice in England and
Wales made an order confirming the cancellation of the amount
standing to the credit of the Company's share premium account (the
"Capital Reduction") under section 648 of the Companies Act 2006.
This transfers the balance into the Profit and loss reserve.
(j) IFRS 15 Cumulative adjustment
Adoption of IFRS 15 from 1 April 2018 has required an adjustment
to accumulated loss to reflect the cumulative effect of the change
in policy net of tax.
Consolidated Cash Flow Statement
For the year ended 31 March 2019
31 March 31 March
2019 2018
Note GBP000 GBP000
--------------------------------------------------- ---- ---------- ----------
Cash flows from operating activities
Cash generated from operations 16 6,502 5,177
Exceptional costs 3 (381) (723)
Finance charges paid (147) (142)
Income taxes refunded / (paid) 198 (8)
--------------------------------------------------- ---- ---------- ----------
Net cash flows generated from operating activities 6,172 4,304
Cash flows from investing activities
Receipt of deferred consideration from sale
of businesses sold 68 63
Acquisition of businesses net of cash acquired (1,963) (1,052)
Purchase of property, plant and equipment (972) (368)
Purchase of intangible assets (1,042) (356)
Net cash flows used in investing activities (3,909) (1,713)
--------------------------------------------------- ---- ---------- ----------
Cash flows from financing activities
Issue of share capital 110 -
Exercise of share warrants - 14
Settlement of deferred consideration (600) (850)
Settlement of MXC scheme liability (1,662) -
New borrowings 4,000 -
Repayment of borrowings (3,257) (1,556)
Net cash used in financing activities (1,409) (2,392)
Net increase in cash and cash equivalents 854 199
Foreign exchange effects 25 41
Cash and cash equivalents at 1 April 510 270
--------------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at 31 March 11 1,389 510
--------------------------------------------------- ---- ---------- ----------
1 Accounting policies - Group
Basis of preparation
The preliminary results for the Company and its subsidiaries
(the "Group") for the year ended 31 March 2019 are unaudited. The
financial information set out in this announcement does not
constitute the Group's financial statements for the year ended 31
March 2019 or 31 March 2018 as defined by Section 434 of the
Companies Act 2006.
This financial information has been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union, IFRIC interpretations and the Companies Act
2006 applicable to companies reporting under IFRS and therefore
complies with Article 4 of the EU IAS regulations.
The financial information for the year ended 31 March 2018 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors, RSM UK Audit
LLP, reported on those accounts and their report was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statement under Section 498 (2) or (3) of the Companies Act
2006.
The statutory accounts for the year ended 31 March 2019 will be
finalised on the basis of the financial information presented by
the Directors in these preliminary results and will be delivered to
the Registrar of Companies following the Annual General
Meeting.
The same accounting policies and methods of computation are
followed as in the latest published audited accounts for the year
ended 31 March 2018, which are available on the Group's website
except for as described below:
Revenue recognition
IFRS 15 (Revenue from customer contracts) is effective for the
Group for the period starting 1 April 2018. The Group has applied
IFRS 15 on a cumulative effect basis with practical expedients from
the date of initial application (1 April 2018), without restatement
of comparative amounts.
The company generates revenue from the provision of software
licences, implementation services, maintenance and support,
outsourced hosting managed services and sale of hardware. Products
and services are sold in bundled packages and may include ad-hoc
consultancy services for example to implement upgrades or to
provide for further user licences during the contract period.
Software licences are provided on either a 'hosted' or
'installed' basis and contracts typically include an initial
contract term of more than one year and, thereafter renew on an
annual basis.
Implementation services comprise 'go live' support which can
include; design and build, data migration, training, configuration
and implementation.
Hosted managed services contracts are multi-element contracts
which may include hosted IT infrastructure, hosted desktop, data
back-up, support services and provision of various software
applications.
Revenue is recognised when the performance obligation has been
satisfied by transferring the promised good or service to the
customer.
At contract inception, the transaction price is determined,
being the amount that the company expects to receive for
transferring the promised goods or services. The transaction price
is allocated to the performance obligations in the contract based
on their relative standalone selling prices.
Software
Software comprises a licence to use the software, upgrades and
support and maintenance. Management have concluded that the
upgrades are fundamental to the functionality of the software and
that therefore, there is a single performance obligation.
Management have also determined that the licence granted to the
customer provides them with the right to access the intellectual
property as it exists, throughout the licence period, and
consequently, where there is an obligation to provide the licence
with upgrades over time, revenue from this single performance
obligation is recognised on a straight line basis over the contract
period. In instances where there are no ongoing obligations, the
revenue would be recognised at a point in time.
Implementation services
Determination of whether implementation is a distinct
performance obligation is based on the degree of complexity
involved in the service, as judged by management. Where the service
comprises basic changes and configuration to implement the
software, it is regarded as distinct. Where the implementation
requires significant configuration and modification of the
underlying software, it is not considered to be distinct and is
combined with other promises in the contract. The treatment of
implementation services will be assessed on a contract by contract
basis.
Managed services
Excluding implementation, which is assessed separately (see
above), all remaining goods and services within managed services
contracts are part of a series of goods and services that are
substantially the same and have the same pattern of transfer to the
customer. The revenue from all these services is recognised on a
straight-line basis over the contract period, which is the period
over which the customer receives and consumes the benefits of goods
and services.
Sales of hardware
Sales of hardware are recognised at the point that control of
the hardware is transferred to the customer. This is usually on
delivery.
Financing arrangements
Where a financing component exists in customer contracts,
because of the payment profile of the implementation fee which is
paid upfront but may be recognised over the period of the contract,
the financing component of the fee is separated from the monthly
revenue and recognised separately as interest.
Contract costs
The incremental costs associated with obtaining a contract are
recognised as an asset if the company expects to recover the costs.
Costs that are not incremental to a contract are expensed as
incurred. Management determine which costs are incremental and meet
the criteria for capitalisation.
Costs to fulfil a contract, which are not in the scope of
another standard, are recognised separately as a contract
fulfilment asset to the extent that they relate directly to a
contract which can be specifically identified and the costs are
expected to be recovered. Contract fulfilment assets are amortised
over the expected contract period on a systematic basis
representing the pattern in which the associated performance
obligation is satisfied.
Costs to fulfil a contract, which do not meet the criteria
above, are expensed as incurred.
The company undertakes an assessment, at each reporting date, to
determine whether capitalised contract costs and contract
fulfilment assets are impaired. An impairment loss is recognised if
the carrying amount of the capitalised contract costs or contract
fulfilment asset exceeds the remaining consideration expected to be
received for the services to which the asset relates, less the
costs that directly relate to providing the services under the
contract.
Deferred and accrued income
Where the payment schedule within a customer contract does not
match the transfer of goods and services, the company will
recognise either accrued or deferred income.
A deferred income contract liability is recognised where
payments made exceed the revenue recognised at the period end date.
An accrued income contract asset is recognised where payments made
are less than the revenue recognised at the period end date.
Financial instruments
The adoption of IFRS 9 'Financial Instruments' with effect from
1 April 2018 has not had a material impact on the results of the
Group.
2 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting to the Chief Operating Decision Makers ('CODM').
The CODM has been identified as the Executive Board.
The Group is comprised of the following main operating
segments:
Managed Services
In this segment are the results of Castleton Managed Services
Ltd for the year ended 31 March 2019.
The segment is engaged in the provision of IT infrastructure and
support for businesses throughout the United Kingdom.
Software Solutions
This segment comprises the results of Castleton Software
Solutions Ltd and Castleton Technology Pty Ltd for the year ended
31 March 2019.
The results of Kinetic Information Systems Pty Ltd ("Kinetic")
are included in this segment from the date of acquisition on 1
December 2017.
The results of DeepLake and Castleton Technology India are
included in this segment from their respective dates of acquisition
(10 January 2019 and 20 February 2019).
The segment is engaged in the provision of integrated software
solutions to the housing association sector.
Year ended 31 March 2019
Managed Software
Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- ---------- --------- --------
Revenue 11,353 15,004 - 26,357
-------------------------------------------- --------- ---------- --------- --------
Operating profit/(loss) before amortisation
of intangible assets and management charge 2,942 4,589 (2,801) 4,730
Amortisation of acquired intangibles (935) (2,268) (35) (3,238)
Management charge (839) (982) 1,821 -
-------------------------------------------- --------- ---------- --------- --------
Operating profit /(loss) 1,168 1,339 (1,015) 1,492
Finance income 11 2 - 13
Finance costs 5 (31) (287) (313)
-------------------------------------------- --------- ---------- --------- --------
Profit/(loss) before tax 1,184 1,310 (1,302) 1,192
-------------------------------------------- --------- ---------- --------- --------
Adjusted EBITDA* 3,279 4,732 (1,686) 6,325
-------------------------------------------- --------- ---------- --------- --------
*Earnings for the year before net finance costs, tax,
depreciation, amortisation, exceptional items, group management
charge and share based payment charges.
Managed Software
Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- ----------
Segment Assets 12,122 38,690 3,312 54,124
Segment Liabilities (4,616) (12,977) (11,225) (28,818)
---------------------------------- --------- ---------- --------- ----------
Net assets/ (liabilities) 7,506 25,713 (7,913) 25,306
---------------------------------- --------- ---------- --------- ----------
Managed Software
Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- --------
Capital Expenditure:
Property, plant and equipment 837 123 13 973
Intangibles - 2,228 - 2,228
Depreciation (332) (111) (10) (453)
Amortisation of intangibles (935) (2,268) (35) (3,238)
---------------------------------- --------- ---------- --------- --------
Year ended 31 March 2018
Managed Software
Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- ---------- --------- --------
Revenue 10,872 12,407 - 23,279
-------------------------------------------- --------- ---------- --------- --------
Operating profit/(loss) before amortisation
of intangible assets and management charge 3,111 3,825 (1,767) 5,169
Amortisation of acquired intangibles (968) (2,022) (37) (3,027)
Management charge (1,013) (489) 1,502 -
-------------------------------------------- --------- ---------- --------- --------
Operating profit /(loss) 1,130 1,314 (302) 2,142
Finance income 17 3 6 26
Finance costs - (42) (298) (340)
-------------------------------------------- --------- ---------- --------- --------
Profit/(loss) before tax 1,147 1,275 (594) 1,828
-------------------------------------------- --------- ---------- --------- --------
Adjusted EBITDA* 3,313 3,155 (1,353) 5,115
-------------------------------------------- --------- ---------- --------- --------
*Earnings for the year before net finance costs, tax,
depreciation, amortisation, exceptional items, group management
charge and share based payment charges.
Managed Software
Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- ----------
Segment Assets 12,265 30,344 (467) 42,142
Segment Liabilities (4,079) (11,440) (8,114) (23,633)
---------------------------------- --------- ---------- --------- ----------
Net assets/(liabilities) 8,186 18,904 (8,581) 18,509
---------------------------------- --------- ---------- --------- ----------
Managed Software
Services Solutions Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- --------
Capital Expenditure:
Property, plant and equipment 319 56 3 378
Intangibles - 355 - 355
Depreciation (198) (98) (10) (306)
Amortisation of intangibles (968) (2,022) (37) (3,027)
---------------------------------- --------- ---------- --------- --------
Income streams originating outside of the United Kingdom
comprised GBP1,940,000 in respect of Castleton Technology Pty Ltd
(formerly Kypera Australia Pty Limited) and Kinetic which had a
combined revenue in 2018 of GBP1,000,000. Income and expenditure
from these Australian companies have been grouped within Software
Solutions in the above analysis.
The Group had no customers who accounted for more than 10% of
the Group's revenue during the year (2018: nil).
Revenue by products and services
Analysis of revenue by category is as follows:
2019 2018
GBP000 GBP000
--------------------------------------------------------------- ------- -------
Sale of hardware 3,369 3,453
Fees from professional services 5,631 4,445
Recurring software, managed service revenues and other revenue
(sale of licenced software solutions) 17,357 15,381
--------------------------------------------------------------- ------- -------
Total revenue 26,357 23,279
--------------------------------------------------------------- ------- -------
3 Exceptional Items
In accordance with the Group's policy in respect of exceptional
items the following (credits)/charges arose during the year:
Exceptional Exceptional 2019 2019 2018 2018
Credits Charges Total Exceptional cash Total Exceptional cash
GBP000 GBP000 GBP000 paid GBP000 paid
------------------ ------------------ ------------------ -------- ----------------- -------
Revaluation of
Agile contingent
consideration - - - - (748) -
Integration and
strategic costs - 5 5 77 - 240
Acquisition and
reorganisation
costs
W - 314 314 301 240 207
Waiver of Opus loan
notes - - - - (220) -
Creation of
contract provision
relating to Opus - - - - 215 -
Full and final
settlement of
customer claim
provision provided
on acquisition of
Kypera - - - - (452) 178
Restructuring (11) - (11) 3 121 98
(11) 319 308 381 (844) 723
------------------ ------------------ ------------------ -------- -------
4 Business Combinations
DeepLake Digital Limited ('DeepLake')
On 10 January 2019, the Group acquired DeepLake who provide
digital technology via SMS, e-mail and social media platforms for
landlord and tenant communication specifically in the social
housing sector, using its own proprietary software.
The Group paid a cash amount of GBP1,800,000 to acquire 100% of
the share capital of DeepLake. GBP153,000 of DeepLake acquisition
costs were taken as an expense to exceptional costs during the
year.
In the period between acquisition in January 2019 and 31 March
2019, DeepLake recorded revenue of GBP278,000 and profit before tax
of GBP174,000.
CarbonNV InfoLogic India Private Limited ("Castleton India")
On 20 February 2019, the Group acquired Castleton India, which
has offices in Bangalore and Vadodara, India, and has provided
additional development capability to the Group via a service
agreement in the year prior to acquisition.
The Group paid a total consideration of GBP351,000 to acquire
100% of the share capital of Castleton India. This comprised of
200,331 ordinary shares of 2 pence in the capital of the Group and
GBP156,000 of cash. GBP77,000 of Castleton India acquisition costs
were taken as an expense to exceptional costs during the year.
In the period between acquisition in February 2019 and 31 March
2019, Castleton India recorded intercompany revenue of GBP52,000
and loss before tax of GBP5,000.
The total gross contracted amount of trade receivables acquired
in these acquisitions was GBP103,000.
Provisional Provisional
Fair Value Fair Value
DeepLake Castleton
India
-------------------------------------------------- ----------- -----------
GBP000 GBP000
-------------------------------------------------- ----------- -----------
Cash consideration paid 1,800 156
Consideration paid in shares of the Company - 195
Provisional fair value of purchase consideration 1,800 351
Less provisional fair value of assets acquired:
Property plant & equipment
T - (36)
Trade receivables net (68) (35)
Other receivables - (32)
Cash - (7)
Income tax payable - 6
Deferred taxation 456 -
Other liabilities 454 56
Software intangible fixed asset (650) -
Customer contracts intangible fixed asset (1,992) -
Provisional goodwill recognised - 303
-------------------------------------------------- ----------- -----------
5 Finance income and costs
Finance income
2019 2018
GBP000 GBP000
--------------------- ------- -------
Other finance income 13 26
--------------------- ------- -------
13 26
--------------------- ------- -------
Finance costs
2019 2018
GBP000 GBP000
------------------------------------------------------------------------------ -------- --------
Interest payable on bank loans and overdrafts 135 150
Interest expense in respect of:
Convertible loan notes and deferred consideration discount unwind 170 190
Foreign exchange loss 8 -
313 340
------------------------------------------------------------------------------ -------- --------
6 Income tax credit
(a) Income tax credits
2019 2018
GBP000 GBP000
----------------------------------------------- ------- -------
Current Tax
Current tax (credit)/charge on profit for
the year (286) 41
Adjustment in respect of prior years (636) (427)
Deferred tax
Origination and reversal of timing differences (1,982) (1,909)
--------------------------------------------------- ------- -------
Total tax (credit) (2,904) (2,295)
--------------------------------------------------- ------- -------
The rate of UK Corporation tax has been 19% since 1 April 2017
and will be 17% from the year beginning 1 April 2020.
(b) Reconciliation of the total income tax credit
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
2019 2018
GBP000 GBP000
----------------------------------------------------- -------- --------
Profit from operations before taxation 1,192 1,828
Accounting profit multiplied by the UK standard rate
of corporation tax of 19% (2018: 19%) 226 347
Net items not deductible for tax purposes 66 56
Adjustment to tax charge in respect of previous year (636) (427)
Research & Development tax relief (810) -
Effect of different tax rates 5 6
Previously unrecognised deferred tax (1,755) (2,277)
------------------------------------------------------ -------- --------
Total income tax credit on operations (2,904) (2,295)
------------------------------------------------------ -------- --------
A research and development (R&D) claim relating to 2016/17
was submitted to HMRC during the year. Further claims are expected
to be made for 2017/18 and 2018/19 and estimates of the value of
these claims have been recognised. During the year, GBP110,000 cash
was received in respect of R&D claims relating to the year
ending 31 March 2016.
(c) Unrecognised deferred tax asset
The Group has unrecognised deferred tax assets in respect of
certain losses and reliefs, of GBP6.0 million (2018: GBP7.3
million). The composition of these losses and reliefs is as
follows: property, plant and equipment differences GBP0.3 million
(2018: GBP1.6 million), and tax losses of GBP5.7 million (2018:
GBP5.7 million). Deferred tax assets have not been recognised in
respect of these losses and reliefs where it is the view of the
Directors that it is not certain that future taxable profits of the
nature required will be available to offset against any deferred
tax asset.
(d) Deferred tax asset/(liability) Deferred tax liability Deferred tax asset Net
GBP000 GBP000 GBP000
At 1 April 2017 (3,377) - (3,377)
Credit to income statement 461 1,448 1,909
Acquisitions (139) 14 (125)
------------------------------------- ------------------------ ------------------ -------
At 31 March 2018 (3,055) 1,462 (1,593)
Credit to income statement 559 1,423 1,982
Credit to equity - 231 231
Acquisitions (456) - (456)
At 31 March 2019 (2,952) 3,116 164
------------------------------------- ------------------------ ------------------ -------
Deferred tax liabilities arise in respect of the temporary
differences on acquired intangible assets.
Deferred tax assets are recognised for tax losses, unused
capital allowances and tax relief carried forward of GBP2,786,000
(2018: GBP1,385,000) and in respect of share-based payments of
GBP316,000 (2018: GBP63,000), to the extent that the realisation of
the related tax benefit through future taxable profits is
probable.
7 Earnings per share
Basic earnings per share are calculated by dividing the profit
attributable to equity shares of the Company GBP4,096,000 (2018:
GBP4,123,000) by the weighted average number of shares of
80,659,635 (March 2018: weighted average number of shares of
78,714,832).
Diluted earnings per share are calculated by dividing the profit
attributable to equity shares of the Company GBP4,233,000 (2018:
GBP4,123,000) by the weighted average number of shares of
88,097,141 respectively (March 2018: weighted average number of
shares of 82,474,239).
2019 2018
Statutory earnings per share:
Basic earnings per share 5.08p 5.23p
-------------------------------- -------- --------
Diluted earnings per share 4.81p 5.00p
-------------------------------- -------- --------
2019 2018
Earnings GBP000 GBP000
Profit attributable to owners of the parent 4,096 4,123
Interest expense on convertible debt (net of tax) 137 -
---------------------------------------------------- -------- --------
Profit used to determine diluted earnings per share 4,233 4,123
---------------------------------------------------- -------- --------
8 Intangible assets
Customer contracts Development
Goodwill Software and related relationships Expenditure Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- -------- -------- -------------------------- ------------ --------
Cost
At 1 April 2017 12,216 5,651 21,476 445 39,788
Internally developed - - - 355 355
Business combinations 667 41 452 - 1,160
Transferred to Property
plant & equipment - - - (18) (18)
At 31 March 2018 12,883 5,692 21,928 782 41,285
Internally developed - - - 542 542
Additions - 1,686 - - 1,686
Business combinations 303 650 1,992 - 2,945
------------------------- -------- -------- -------------------------- ------------ --------
At 31 March 2019 13,186 8,028 23,920 1,324 46,458
Amortisation
At 1 April 2017 - (897) (5,158) (128) (6,183)
Charge for the year - (504) (2,485) (38) (3,027)
At 31 March 2018 - (1,401) (7,643) (166) (9,210)
Charge for the year - (588) (2,586) (64) (3,238)
------------------------- -------- -------- -------------------------- ------------ --------
At 31 March 2019 - (1,989) (10,229) (230) (12,448)
Net carrying amount
31 March 2019 13,186 6,039 13,691 1,094 34,010
------------------------- -------- -------- -------------------------- ------------ --------
31 March 2018 12,883 4,291 14,285 616 32,075
------------------------- -------- -------- -------------------------- ------------ --------
31 March 2017 12,216 4,754 16,318 317 33,605
------------------------- -------- -------- -------------------------- ------------ --------
Customer contracts and related relationships relate to the value
of contracts and relationships of acquired companies and includes
the value of reseller agreements.
The amortisation in both years relates to operations and is
included in the profit for the year from operations in the
Consolidated Statement of Comprehensive Income within
administrative expenses.
Goodwill is reviewed for impairment annually or more frequently
if events or changes in circumstances indicate that the carrying
value may be impaired. Goodwill is supported by calculating the
discounted cash flows arising from the existing businesses.
9 Property, plant and equipment
Equipment,
Network fixtures
Leasehold infrastructure and
property and equipment fittings Total
GBP000 GBP000 GBP000 GBP000
----------------------------- --------- --------------- ---------- -------
Cost
At 1 April 2017 303 713 350 1,366
Additions 11 337 30 378
Business Combinations - - 11 11
Disposals - - (18) (18)
Exchange movements - - (2) (2)
Transfers (from intangibles) - 18 - 18
Adjustments 2 153 (155) -
At 31 March 2018 316 1,221 216 1,753
Additions 12 924 37 973
Business Combinations 22 - 14 36
Exchange movements (1) - - (1)
At 31 March 2019 349 2,145 267 2,761
Accumulated depreciation
At 1 April 2017 (44) (292) (249) (585)
Charge for the year (18) (235) (53) (306)
Disposals - - 10 10
Adjustments (2) (153) 155 -
At 31 March 2018 (64) (680) (137) (881)
Charge for the year (30) (360) (63) (453)
At 31 March 2019 (94) (1,040) (200) (1,334)
Net book amount
31 March 2019 255 1,105 67 1,427
------------------------------ --------- --------------- ---------- -------
31 March 2018 252 541 79 872
------------------------------ --------- --------------- ---------- -------
31 March 2017 259 421 101 781
------------------------------ --------- --------------- ---------- -------
The depreciation for the year of GBP453,000 (2017: GBP306,000)
has been charged to administrative expenses.
A mortgage loan of GBP92,000 (2018: GBP100,000) is secured on a
long leasehold property with a book value of GBP163,000 (2018:
GBP167,000). Short leasehold property has a book value of GBP92,000
(2017: GBP85,000).
10 Trade and other receivables
2019 2018
Current GBP000 GBP000
---------------------------------------------------- ------- -------
Trade receivables 6,054 5,147
Less: provision for impairment of trade receivables (262) (223)
Trade receivables - net 5,792 4,924
Other receivables* 1,562 806
Prepayments 1,054 655
Amounts due within 12 months 8,408 6,385
---------------------------------------------------- ------- -------
Non-current
Trade receivables - 97
Prepayments 29 23
Other receivables* 259 130
---------------------------------------------------- ------- -------
Amounts due after more than 12 months 288 250
---------------------------------------------------- ------- -------
Total receivables 8,696 6,635
---------------------------------------------------- ------- -------
* Adoption of IFRS 15 from 1 April 2018 has resulted in an
increase in current other receivables of GBP0.5 million and
non-current other receivables of GBP0.3 million.
11 Cash and cash equivalents
2019 2018
GBP000 GBP000
------------------------------------------------ ------- -------
Cash at bank and in hand (excluding overdrafts) 1,389 510
------------------------------------------------ ------- -------
12 Trade and other payables
Current
2019 2018
GBP000 GBP000
----------------------------- ------- -------
Trade payables 2,040 1,167
Other payables 448 305
Taxation and social security 932 772
Accruals 2,173 1,800
Income tax payable 54 113
Deferred income* 8,282 6,923
13,929 11,080
----------------------------- ------- -------
Non-current
2019 2018
GBP000 GBP000
----------------- ------- -------
Deferred income* 962 904
Accrued interest 342 348
1,304 1,252
----------------- ------- -------
* Adoption of IFRS 15 from 1 April 2018 has resulted in an
increase in current deferred income of GBP0.7 million and
non-current deferred income of GBP0.6 million.
13 Borrowings
2019 2018
Current GBP000 GBP000
---------- ------- -------
Mortgage 9 8
Bank loan 1,333 1,000
1,342 1,008
---------- ------- -------
2019 2018
Non-current GBP000 GBP000
------------ ------- -------
Bank Loan 2,667 2,250
Mortgage 84 92
2,751 2,342
------------ ------- -------
The mortgage is secured over a long leasehold property. The
property is held within fixed assets at a cost GBP0.2 million. The
mortgage is repayable monthly at an interest rate of 2.9% above
base rate. The remaining term at 31 March 2019 is 113 months.
Overdraft facility
The Group has an overdraft facility of GBP2.5 million with
Barclays Bank plc ("Barclays"). Interest is payable at 2.5% above
LIBOR on the overdraft balance, which is repayable on demand. At
the balance sheet date none (2018: none) of the facility had been
utilised. The overdraft is secured on the assets of the Group by
way of fixed and floating charges.
Bank loan
On 10 January 2019, the Company settled its loan agreement with
Barclays and replaced it with a new facility for GBP4.0 million.
Interest is payable at 2.25% (2018: 2.5%) above LIBOR on the
outstanding balance, which is repayable at a rate of GBP333,000
(2018: GBP250,000) per quarter over 3 years.
The loan is secured on the assets of the Group by way of fixed
and floating charges.
14 Convertible loan notes
Opus Kypera Total
GBP000 GBP000 GBP000
---------------------------------- ------ ------- ------- -------
At 31 March 2017 215 2,882 3,097
Interest unwound 5 169 174
Interest due to be paid - (173) (173)
Waiver (220) - (220)
Repayments - (500) (500)
At 31 March 2018 - due to be paid
in more than one year - 2,378 2,378
------------------------------------------- ------- ------- -------
Interest unwound - 131 131
Interest due to be paid - (126) (126)
Conversion to shares - (500) (500)
At 31 March 2019 - due to be paid
in more than one year - 1,883 1,883
------------------------------------------- ------- ------- -------
Kypera Loan notes
On 31 January 2016, in order to fund the acquisition of Kypera,
the Company issued GBP3.5 million of unsecured loan notes ("Kypera
Loan Notes"), which have a term of 5 years and carry interest at a
rate of 5% per annum. The Kypera Loan Notes can be converted into
new ordinary shares of 2 pence each at a price of 85.6 pence per
Ordinary Share. Conversion is at the option of the holder at any
time during the 5-year term. The Company can redeem the Kypera Loan
Notes from the third anniversary of issue if not already
converted.
On 9 August 2018, MXC Guernsey Limited, a wholly owned
subsidiary of MXC Capital Limited ("MXC") served a conversion
notice with respect to the remaining convertible loan notes
("CLNs") it held, together with the accrued interest, amounting to
GBP632,000 in total. The CLNs were converted at 85.6 pence per
ordinary share of 2 pence each in the capital of the Company
therefore 738,896 new ordinary shares of 2 pence were allotted to
MXC on 17 August 2018.
15 Deferred consideration
2019 2018
Current GBP000 GBP000
----------------------- ------- -------
Deferred consideration 150 592
150 592
----------------------- ------- -------
2019 2018
Non-current GBP000 GBP000
----------------------- ------- -------
Deferred consideration - 143
- 143
----------------------- ------- -------
16 Net cash flows from operating activities
2019 2018
GBP000 GBP000
-------------------------------------------------- ----------- -----------
Profit on ordinary activities before taxation 1,192 1,828
Adjustments for:
Exceptional items 308 (844)
Net finance costs 300 314
Depreciation of property, plant and equipment 453 306
Amortisation of intangibles 3,238 3,027
Equity-settled share-based payment charge 834 484
Movements in working capital:
Increase in trade and other receivables (1,233) (1,183)
Decrease in trade and other payables 1,256 1,402
Increase/(decrease) in provisions 160 (135)
(Increase)/decrease in inventories 2 (22)
Foreign exchange losses on operating activities (8) -
Cash generated from operations 6,502 5,177
-------------------------------------------------- ----------- -----------
The principal non-cash transactions in 2019 are as below:
During the period, the Company issued a total of 1,432,706 new
ordinary shares of 2 pence each to Brixx International Limited at a
price of 82.75 pence per ordinary share, in respect of the
acquisition of the exclusive, perpetual and assignable licence in
relation to the Castleton Strategic Modelling (formerly "Brixx")
platform, further development of the platform and settlement of pre
Asset Purchase licence fees payable. The consideration for the
Asset Purchase was GBP1,686,000, of which GBP1,186,000 was a non
cash transaction and GBP500,000 was also paid in cash.
Conversion of MXC Loan notes on 9 August 2018, MXC Guernsey
Limited, a wholly owned subsidiary of MXC Capital Limited ("MXC")
served a conversion notice with respect to the remaining
convertible loan notes ("CLNs") it held, together with the accrued
interest, amounting to GBP632,000 in total. The CLNs were converted
at 85.6 pence per ordinary share of 2 pence each in the capital of
the Company therefore 738,896 new ordinary shares of 2 pence were
allotted to MXC on 17 August 2018.
On 20 February 2019 the Company issued 200,331 ordinary shares
of 2 pence to the former owners of CarbonNV InfoLogic India Private
Limited (now known as Castleton India) at a price of 97.5 pence per
ordinary share in respect of the acquisition of Castleton India.
The consideration for the Asset Purchase was GBP351,000, of which
GBP195,000 was a non cash transaction and GBP156,000 was also paid
in cash.
On 23 October 2018, the Company completed a capital reduction
process, which debited the Company's share premium account under
section 648 of the Companies Act 2006 with GBP18,835,000 and
credited the profit and loss reserve with GBP18,835,000.
Adjustments to the March 2018 balance sheet due to the
introduction of IFRS 15 were made which credited deferred income
GBP1,286,000, debited other debtors with GBP760,000, debited the
deferred tax asset with GBP100,000 and debited the brought forward
profit and loss reserve with GBP426,000.
The principal non-cash transactions in 2018 are as below:
Settlement of the MXC Scheme which credited other creditors and
debited the accumulated loss reserve with GBP1,662,000. On 3 April
2018, the cash was paid to MXC which resulted in a financing cash
outflow of GBP1,662,000 during the financial year ending 31 March
2019.
The waiver of the debt part of the Opus Loan notes which
credited provisions and debited Loan notes with GBP215,000.
The waiver of the equity part of the Opus Loan notes which
credited the profit and loss reserve and debited the Equity
reserves with GBP392,000.
Reconciliation of net debt
Net debt as referred to in the Strategic Report is calculated as
follows:
2019 2018
GBP000 GBP000
------------------------------------------- ----------- -----------
Cash and cash equivalents 1,389 510
Borrowings - repayable within one year* (1,492) (1,600)
Borrowings - repayable after one year (4,976) (5,211)
------------------------------------------- ----------- -----------
Net Debt (5,079) (6,301)
------------------------------------------- ----------- -----------
Cash and cash equivalents 1,389 510
Gross debt - fixed interest rates (2,375) (3,461)
Gross debt - variable interest rates* (4,093) (3,350)
------------------------------------------- ----------- -----------
Net Debt (5,079) (6,301)
------------------------------------------- ----------- -----------
* Included within Gross debt - variable interest rates and also
within Borrowings - repayable within one year, is an overdraft of
GBPnil (2018: GBPnil).
17 Subsequent events
As we see the services offered by the Managed Services division,
namely Cloud delivery becoming more significant going forwards and
the level of interest shown by our customers increasing in this
area, we took the decision post year end to merge the two divisions
to create a truly 'one Castleton' structure. This integration will
be completed by the end of June 2019 with the business operating
from a single entity which will assist in delivering a unified,
seamless and enhanced customer experience.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFFEEWFUSESM
(END) Dow Jones Newswires
June 18, 2019 02:01 ET (06:01 GMT)
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