TIDMCTP
RNS Number : 2328S
Castleton Technology PLC
05 November 2019
Castleton Technology plc
("Castleton", the "Group" or the "Company")
Unaudited Interim Results for the Six Months Ended 30 September
2019
Castleton Technology plc (AIM: CTP), the software and managed
services provider to the public and not-for-profit sectors, today
announces its unaudited interim results for the six months ended 30
September 2019.
Financial Highlights
-- Recurring revenues of GBP7.6 million comprise 66% of total
revenue (H1 FY18: recurring revenues of GBP7.0 million comprise 55%
of total revenue)
-- Revenues decreased 10% to GBP11.6 million (H1 FY19: GBP12.9
million). Organic(i) revenues decreased by 13%, driven by lower
one-off revenues
-- Adjusted EBITDA(ii) decreased 3% to GBP2.9 million (H1 FY19:
GBP3.0 million). The adjusted EBITDA(v) of GBP2.9 million has
benefited by GBP0.2 million due to IFRS 16 with costs now taken in
depreciation and finance costs. Organic(i) Adjusted EBITDA
decreased by 11%
-- Cash generated from operations of GBP2.3 million (H1 FY19: GBP3.0 million) which is 80% cash conversion(iii) (H1 FY19 102%)
-- Loss before tax for the period of GBP0.2 million (H1 FY19:
Profit before tax for the period GBP0.5 million)
-- Adjusted net debt(iv) as at 30 September 2019 of GBP4.1
million excluding IFRS 16 lease liabilities (30 September 2018:
GBP5.3 million). As at 31 March 2019, net debt was GBP5.1
million
-- Maiden dividend paid on 18 September 2019 of 1p per share
Operational Highlights
-- Significant new Managed Services contract wins with Grand
Union, Suffolk Housing and Colne Housing
-- Completion of the first version of the Castleton.AI platform,
and first standalone sale of this product
-- Merging of the Software Solutions and Managed Services
businesses on 1 June 2019, to create a truly "one Castleton"
structure with the intention of delivering a unified, seamless and
enhanced customer experience
-- Growth in contracted backlog of 5% since H1 FY19
-- Social housing customer base now 595, compared to 591 as at 31 March 2019
-- Percentage of customers taking more than one product has
increased to 52%, from 50% at 31 March 2019
Post Period Highlights
-- Chosen by the National Housing Federation as the preferred
supplier for Housing Management Solutions
Outlook
-- The Company is confident that revenue, EBITDA and cash
generation will show a material improvement in the second half of
the year
David Payne, Chairman of Castleton, commented:
"As reported at the Group's trading update on 10 October 2019,
the first six months of FY20 has been challenging, particularly
compared to the strong comparable period last year. This was
primarily due to a decline in one-off revenues and the
reorganisation of the business taking longer to embed than first
anticipated.
We have focussed our efforts on recurring revenue and building a
strong future revenue base, and whilst this reorganisation has
created short-term disruption, it will result in the streamlining
of our sales and delivery functions. I am confident that this will
stand the business in a strong position for the future, and I
remain optimistic of the Group's success and continued growth."
(i) Organic growth is stated after adjusting for the full year
effect of Deeplake Digital Limited, acquired 10 January 2019
(ii) Earnings for the period from continuing operations before
net finance costs, depreciation, amortisation, exceptional items,
and share based payment charges.
(iii) Cash conversion is calculated as cash generated from
operations divided by Adjusted EBITDA(ii)
(iv) Including deferred consideration and interest accrued on
loan notes. For the period ended 30 September 2018 including
contingent consideration
(v) EBITDA for six months to September 2019 is accounted for
under IFRS 16. EBITDA for six months to September 2018 is pre IFRS
16. For further information, see note 1.
Please see a video of the Company's results here
https://plcwebcast.uk/ctph119
Enquiries:
Castleton Technology plc Tel. +44 (0)845 241 0220
Dean Dickinson, Chief Executive
Officer
Haywood Chapman, Chief Financial
Officer
finnCap
Jonny Franklin-Adams / Simon Tel. +44 (0)20 7220 0500
Hicks (Corporate Finance)
Andrew Burdis (ECM)
Alma PR Tel. +44(0) 203 405 0208
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 is inside
information for the purposes of Article 7 of Regulation
596/2014.
Chairman's Statement
Dear Shareholder
I am reporting on the results of the Group for the six months
ended 30 September 2019, which, as reported previously, has been a
difficult period, especially in the second quarter with both
hardware and professional services revenue being behind
expectations. Additionally, whilst the merger of our Managed
Services and Software Solutions businesses into a single unit will
ultimately streamline our sales and delivery functions, the
benefits are taking longer to materialise than we anticipated. We
have however seen recurring revenues increase by GBP0.6 million in
absolute terms in comparison to the prior period, with total
recurring revenues now standing at 66% (H1 FY18: 55% of total
revenue) and gross profit margin increase to 59% (Restated H1 FY19:
56%). The underlying quality and metrics of the business remain
robust.
Operational Review
The Group completed three significant contract wins during the
period in relation to cloud offerings - Grand Union, Suffolk
Housing and Colne Housing - with several more tenders in the
pipeline. The Grand Union contract, worth GBP1.0 million over four
years, will provide a full end-to-end managed service offering that
demonstrates the progress within our stated strategy of growing
recurring revenue and building long-term prospects within the core
customer base. Suffolk Housing and Colne Housing were additional
wins where, although we were the incumbent, we increased the scope
and scale of our offering. The contract values are GBP0.5 million
over three years and GBP0.4 million over two years for Suffolk
Housing and Colne Housing respectively.
We were also successful in being chosen as the National Housing
Federation's preferred supplier for Housing Management Solutions,
post period end. The Federation represents roughly 900 of the UK's
smaller housing associations that are struggling to find fit-for
purpose, integrated housing solutions. It is envisaged that our
Castleton Community solution, which has been specifically developed
for housing associations with less than 1,000 properties, will
assist the Federation's members in achieving their future growth
plans.
The transition to cloud has meant that our customers are
performing fewer infrastructure reviews and the associated hardware
sales that this brings is one of the reasons why we have amended
our outlook for the full year. We are effectively replacing one-off
hardware revenues with more recurring revenue from cloud tenders.
Our contracted backlog of revenue has grown 5% year-on-year and now
stands at GBP30.1 million, up from GBP28.6 million at September
2018.
The merger of our Managed Services and Software Solutions
businesses at the start of the year was designed to drive greater
levels of cross sell and, whilst we have had some initial success,
this has taken longer to embed than we expected. At the start of
Q2, we rightsized the professional services team, as the level of
backlog needed to keep this team fully utilised was lower than we
had anticipated. This has led to a decrease in professional
services revenue for our full year forecast and an exceptional
charge for associated redundancy and reorganisation costs.
Cross selling has continued with 52% of our 595 Housing
Association customers now taking more than one product or service
from us, up from 50% of 591 customers at the end of March 2019. The
majority of this increase has been from the selling of hosting
solutions to our financial modelling customers. We expect to see
further cross selling as we move into the second half of the year.
Despite the increase in customers and cross selling, there was
lower customer retention than in previous periods. We do not expect
this lower retention to continue in the second half of the
year.
We remain focused on product development with the aim of
providing our customers with the technology and services they
require to operate effectively and are pleased with the skill and
efficiency of our recently acquired Indian division.
Trading and Results
IFRS 16 (leases) is effective for the period starting 1 April
2019 and the Group has applied IFRS 16 on a cumulative catch up
basis from the date of initial application (1 April 2019), without
restatement of comparative amounts. The quantitative impact of IFRS
16 on the interim 2020 financial statements is a GBP0.2 million
reduction in administrative expenses and a GBP0.2 million increase
in depreciation, resulting in no material change to finance costs
or operating profit for the period ended 30 September 2019. On
initial transition, right of use assets increased by GBP1.2 million
and lease liabilities increased by GBP1.3 million. At 30 September
2019, right of use assets are GBP1.0 million and lease liabilities
are GBP1.0 million. The lease liabilities of GBP1.0 million are
included in the net debt of GBP5.1 million at 30 September
2019.
The Group generated revenue for the six months to 30 September
2019 of GBP11.6 million (H1 FY19: GBP12.9 million), the reduction
being the result of lower one-off revenues. As a result of the
change in mix, as well as an absolute increase in recurring revenue
of GBP0.6 million to GBP7.6 million (H1 FY19: GBP7.0 million),
recurring revenues now comprise 66% of total revenues (H1 FY19: 55%
of total revenues).
Gross profit of GBP6.9 million (Restated H1 FY19: GBP7.2
million) represents a gross margin of 59% (Restated H1 FY19: 56%)
which corresponds to the increased level of higher margin recurring
revenue.
The Group generated an Adjusted EBITDA* of GBP2.9 million in the
period (H1 FY19: GBP3.0 million).
Administrative expenses of GBP6.5 million are down from GBP6.6
million in the restated comparative period. Included within
administration expenses is a GBP0.3 million charge for share based
payments (H1 FY19: GBP0.6 million), which has decreased due to the
prior period including an accelerated charge on options that vested
in the prior period.
Net finance costs amounted to a P&L charge of GBP0.2 million
(H1 FY19: GBP0.1 million).
The loss before tax for the period is GBP0.2 million, (H1 FY19:
profit of GBP0.5 million). This is after exceptional items of
GBP0.3 million (H1 FY19: GBPnil) due to the merger of the Managed
Services and Software businesses, and the redundancy process
mentioned above. The loss before tax is also after charging
amortisation of intangibles of GBP1.8 million (H1 FY19: GBP1.6
million). The tax credit in the year of GBP0.3 million is based on
the estimated R&D tax credit for the period to 30 September
2019, with an adjustment in respect of prior years of GBP0.5
million due to revised estimates for FY18 and FY19 and receipt of
the FY17 claim. These are offset by GBP0.1 million due to
recognising a deferred tax charge on capitalised development costs.
The overall tax credit for the period is GBP0.7 million (H1 FY19:
GBP0.0 million).
On 18 September, we paid our maiden dividend of 1p per share, at
a cash cost of GBP0.8 million in total.
Basic earnings per share ('EPS') from continuing activities was
0.63p (H1 FY19: 0.68p). Diluted EPS from continuing activities was
0.58p (H1 FY19: 0.65p). The basic and diluted EPS as at 31 March
2019 of 5.08p and 4.81p respectively were due to exceptional
credits and recognition of deferred tax assets related to unused
capital allowances and therefore the EPS as at 30 September 2019
was expected to be lower than at the prior year end.
* Before net finance costs, tax, depreciation, amortisation,
exceptional items and share based payment charges
Cash Flow and Net Debt
Cash generated by operations amounted to GBP2.3 million (H1
FY19: GBP3.0 million) comprising Adjusted EBITDA* of GBP2.9 million
(H1 FY19: GBP3.0 million) and operating working capital movements
of GBP(0.6) million (H1 FY19: GBP0.1 million), predominately from a
reduction in trade and other payables and a reduction in deferred
income, offset by a decrease in trade receivables. This gave a cash
conversion of EBITDA of 80% (H1 FY19: 102%).
Net finance charges paid of GBP0.2 million (H1 FY19: GBP0.1
million) reflect the cash cost of the interest on the loan with
Barclays. As at the balance sheet date, GBP3.4 million of the term
loan was outstanding.
During the period, a total of GBP0.8 million was received
relating to R&D tax claims for FY16 and FY17 (H1 FY19: GBP0.1
million relating to FY16). Claims for later years are currently in
progress. The final GBP0.2 million of deferred consideration for
the acquisition of Agile was paid in the period (H1 FY19: GBP0.3
million) and, as a result, no deferred consideration remains on the
balance sheet. The total increase in cash and cash equivalents was
GBP0.3 million (H1 FY19: decrease of GBP0.4 million). Adjusted net
debt** at the period end stood at GBP4.1 million, compared to
GBP5.1 million as at 31 March 2019 and GBP5.3 million as at 30
September 2018. Net debt at the period end, including GBP1.0
million of IFRS 16 lease liabilities, stands at GBP5.1 million.
* Before net finance costs, tax, depreciation, amortisation,
exceptional items and share based payment charges
** Including deferred consideration, interest accrued on loan
notes and excluding IFRS 16 lease liabilities
Summary and Outlook
Whilst it has been disappointing to report reduced revenue and
profit in the period, compared to the same period in the prior
year, which has resulted in a downgrade to our forecasts for the
full year, the underlying business remains strong and profitable.
Additionally, we believe the reorganisation of the Group, despite
impacting the business in the short term, will make the Group more
successful going forward.
The payment of the maiden dividend in the period demonstrates
our confidence in the business and we expect to continue with our
progressive dividend policy.
The significant cross selling opportunities we have will
continue to drive further penetration of our customer base, with
73% of new sales during the period to existing customers.
The market opportunity remains large and given the Group's now
established position as a 'one-stop-shop' serving the social
housing sector, the Board is optimistic about the Group's continued
growth prospects.
David Payne
Non-Executive Chairman
Consolidated Statement of Comprehensive Income
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 Restated(1) 2019 Restated(1)
Note GBP000 GBP000 GBP000
--------------------------------------- ----- ------------ ------------------ ------------------
Revenue 4 11,634 12,911 26,357
Cost of sales (4,760) (5,681) (10,859)
--------------------------------------- ----- ------------ ------------------ ------------------
Gross profit 6,874 7,230 15,498
Administrative expenses (6,537) (6,613) (13,698)
Exceptional charges 5 (333) - (319)
Exceptional credits 5 18 - 11
--------------------------------------- ----- ------------ ------------------ ------------------
Operating profit 22 617 1,492
Finance income 3 8 13
Finance costs (224) (128) (313)
--------------------------------------- ----- ------------ ------------------ ------------------
(Loss) / profit on ordinary
activities before taxation (199) 497 1,192
Income tax credit 6 711 47 2,904
--------------------------------------- ----- ------------ ------------------ ------------------
Profit for the period attributable
to the owners of the parent company 512 544 4,096
Items that may be subsequently
reclassified to profit or loss
Foreign operations - foreign currency
translation differences (19) 20 25
--------------------------------------- ----- ------------ ------------------ ------------------
Total comprehensive income for
the period attributable to the
owners of the parent company 493 564 4,121
--------------------------------------- ----- ------------ ------------------ ------------------
Earnings per share 7
Basic earnings per share 0.63p 0.68p 5.08p
Diluted earnings per share 0.58p 0.65p 4.81p
--------------------------------------- ----- ------------ ------------------ ------------------
Non GAAP measure: Adjusted EBITDA
Operating profit 22 617 1,492
Depreciation and amortisation 2,326 1,749 3,691
--------------------------------------- ----- ------------ ------------------ ------------------
EBITDA 2,348 2,366 5,183
Share-based payments 274 603 834
Exceptional credits (18) - (11)
Exceptional charges 333 - 319
--------------------------------------- ----- ------------ ------------------ ------------------
Adjusted EBITDA* 2,937 2,969 6,325
--------------------------------------- ----- ------------ ------------------ ------------------
(1) Cost of Sales and Administrative expenses has been restated
for both comparative periods to standardise treatment of payroll
costs between the merged business divisions. There is no effect on
operating profit or EBITDA or Adjusted EBITDA*. See note 2 for
further details.
*Earnings for the period from continuing operations before net
finance costs, depreciation, amortisation, exceptional items, and
share based payment charges.
Consolidated Statement of Financial Position
Unaudited Unaudited 30 Audited
Note 30 September September 31 March
2019 2018 Restated(2) 2019
GBP000 GBP000 GBP000
------------------------------- ------- -------------- ---------------------------------- ----------
Assets
Non-current assets
Intangible assets 32,715 32,501 34,010
Property, plant and equipment 1,230 847 1,427
Right of use asset 992 - -
Trade and other receivables 8 211 451 288
Deferred tax asset 3,016 1,510 3,116
38,164 35,309 38,841
------------------------------- ------- -------------- ---------------------------------- ----------
Current assets
Inventories 70 87 70
Trade and other receivables 8 6,375 6,456 8,408
Current income tax receivable 1,208 154 1,189
Cash and cash equivalents 1,664 183 1,389
------------------------------- ------- -------------- ---------------------------------- ----------
9,317 6,880 11,056
------------------------------- ------- -------------- ---------------------------------- ----------
Total assets 47,481 42,189 49,897
------------------------------- ------- -------------- ---------------------------------- ----------
Equity and liabilities
Equity attributable to owners
of the parent
Called up share capital 1,684 1,677 1,681
Share premium account 319 18,835 191
Equity reserve 143 144 143
Translation reserve 47 61 66
Merger reserve 7,966 7,966 7,966
Other reserve - - 50
Accumulated profit/(loss) 15,146 (7,554) 15,209
------------------------------- ------- -------------- ---------------------------------- ----------
Total equity attributable
to owners of the parent 25,305 21,129 25,306
------------------------------- ------- -------------- ---------------------------------- ----------
Consolidated Statement of
Financial Position (cont.)
Unaudited Unaudited Audited
Note 30 September 30 September 31 March
2019 2018 Restated(2) 2019
GBP000 GBP000 GBP000
---------------------------------------- -------------- -------------- ------------------ ----------
Liabilities
Current liabilities
Trade and other payables 9 11,222 11,382 13,929
Lease liabilities 453 - -
Borrowings 1,342 1,086 1,342
Deferred consideration - 435 150
Provisions 70 81 156
---------------------------------------- -------------- -------------- ------------------ ----------
13,087 12,984 15,577
---------------------------------------- -------------- -------------- ------------------ ----------
Non-current liabilities
Trade and other payables 9 1,393 1,520 1,304
Borrowings 2,104 1,838 2,751
Convertible loan notes 1,902 1,896 1,883
Lease liabilities 572 - -
Deferred taxation liability 2,941 2,782 2,952
Provisions 177 40 124
---------------------------------------- -------------- -------------- ------------------ ----------
9,089 8,076 9,014
---------------------------------------- -------------- -------------- ------------------ ----------
Total liabilities 22,176 21,060 24,591
---------------------------------------- -------------- -------------- ------------------ ----------
Total equity and liabilities 47,481 42,189 49,897
---------------------------------------- -------------- -------------- ------------------ ----------
(2) Restated from prior year following the amendment of the
Group's opening IFRS 15 transition adjustment and H1 2019 results
as described in the Castleton Technology Plc consolidated financial
statements for year ended 31 March 2019 (see note 2).
Consolidated Statement of Changes in Equity
(Attributable to the owners of the Parent Company)
(Called (Share Equity Merger Translation Other Accumulated (Total
up share premium Reserve reserve reserve reserves profit/(loss) equity)
capital) account) (a) (b) (c) (h) Restated
(2)
(GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000)
(At 1 April 2018) (1,628) (17,006) (251) (7,966) (41) (-) (8,383) (18,509)
(Profit for the period) (-) (-) (-) (-) (-) (544) (544)
(Other comprehensive
income) (-) (-) (-) (-) (20) (-) (20)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(Total comprehensive
income) (-) (-) (-) (-) (20) (-) (544) (564)
IFRS 15 cumulative
adjustment (j) (-) (-) (-) (-) (-) (-) (426) (426)
(Transactions with owners in their
capacity as owners:)
(Share based payments) (-) (-) (-) (-) (-) (-) (603) (603)
Shares issued to
Brixx International
(d) (29) (1,157) (-) (-) (-) (-) (-) (1,186)
Conversion of MXC
loan notes (e) (15) (617) (107) (-) (-) (-) (107) (632)
Exercise of share
options (f) (5) (55) (-) (-) (-) (-) (-) (60)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(At 30 September
2018) (1,677) (18,835) (144) (7,966) (61) (-) (7,555) (21,128)
(Profit for the period) (-) (-) (-) (-) (-) (-) (3,552) (3,552)
(Other comprehensive
income) (-) (-) (-) (-) (5) (-) (-) (5)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(Total comprehensive
income) (-) (-) (-) (-) (5) (-) (3,552) (3,557)
(Transactions with owners in their
capacity as owners:)
(Share based payments) (-) (-) (-) (-) (-) (-) (231) (231)
Conversion of MXC
loan notes (e) (-) (-) (1) (-) (-) (-) (1) (-)
Shares issued to
CarbonNV (g) (4) (191) (-) (-) (-) (-) (-) (195)
Capital Reduction
(i) (-) (18,835) (-) (-) (-) (-) (18,835) (-)
(Tax relating to
items in equity) (-) (-) (-) (-) (-) (-) (145) (145)
(Obligation to issue
shares) (-) (-) (-) (-) (-) (50) (-) (50)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(At 31 March 2019) (1,681) (191) (143) (7,966) (66) (50) (15,209) (25,306)
(Profit for the period) (-) (-) (-) (-) (-) (-) (512) (512)
(Other comprehensive
income) (-) (-) (-) (-) (19) (-) (-) (19)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(Total comprehensive
income) (-) (-) (-) (-) (19) (-) (512) (493)
IFRS 16 cumulative
adjustment (j) (-) (-) (-) (-) (-) (-) (32) (32)
(Transactions with owners in their
capacity as owners:)
(Share based payments) (-) (-) (-) (-) (-) (-) (274) (274)
(Dividends paid) (-) (-) (-) (-) (-) (-) (817) (817)
Exercise of share
options (f) (3) (128) (-) (-) (-) (50) (-) (81)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(At 30 September
2019) (1,684) (319) (143) (7,966) (47) (-) (15,146) (25,305)
------------------------- -------- --------- --------- --------- ------------ --------- -------------- ---------
(2) Restated from prior year following the amendment of the
Group's opening IFRS 15 transition adjustment and H1 2019 results
as described in the Castleton Technology Plc consolidated financial
statements for year ended 31 March 2019 (see note 2).
Consolidated Statement of Changes in Equity (cont.)
(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 30 September 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 Castleton Technology
India Pvt 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
companies are recognised in the translation reserve.
(d) Shares issued to Brixx International
During the period ended 30 September 2018, 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 period ended 30
September 2018.
(e) 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.
(f) 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 6 August 2019 one employee exercised 52,980 options and two
employees exercised a total of 57,840 options over new ordinary
shares of 2 pence each in the capital of the company at an exercise
price of 75.5 pence and 71.75 pence per ordinary share
respectively.
(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 Technology India Pvt Ltd (previously known
as CarbonNV InfoLogic India Private Limited).
(h) Other reserves
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 at 31 March
2019, 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 Cumulative adjustment
Adoption of IFRS 15 from 1 April 2018 and IFRS 16 from 1 April
2019 has required an adjustment to accumulated profit/(loss) to
reflect the cumulative effect of the change in policy net of tax.
Further details are included in note 1 and note 2 of the
accounts.
Consolidated Cash Flow Statement
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 2019
Note GBP000 GBP000 GBP000
-------------------------------------- ----- ------------ ------------ -----------------
Cash flows from operating
activities
Cash generated from operations 10 2,341 3,027 6,502
Exceptional items (410) (160) (381)
Net finance charges paid (111) (59) (147)
Income taxes received/(paid) 773 118 198
Net cash flows generated from
operating activities 2,593 2,926 6,172
-------------------------------------- ----- ------------ ------------ -----------------
Cash flows from investing
activities
Receipt of deferred consideration
from sale of businesses 30 33 68
Acquisition of businesses,
net of cash acquired - (14) (1,963)
Purchase of property, plant
and equipment (131) (158) (972)
Purchase of intangible assets (443) (806) (1,042)
Net cash flows used in investing
activities (544) (945) (3,909)
-------------------------------------- ----- ------------ ------------ -----------------
Cash flows from financing
activities
Issue of share capital 82 - 110
Exercise of share options
and warrants - 60 -
Settlement of deferred consideration (150) (300) (600)
Settlement of MXC Scheme liability - (1,662) (1,662)
Lease repayments (226) - -
New borrowings - - 4,000
Repayment of borrowings (671) (504) (3,257)
Dividends paid (817) - -
Net cash flows used in financing
activities (1,782) (2,406) (1,409)
-------------------------------------- ----- ------------ ------------ -----------------
Net (decrease)/increase in
cash and cash equivalents 267 (425) 854
Foreign exchange effects 8 20 25
Cash and cash equivalents
at beginning of period 1,389 510 510
Cash and cash equivalents
at end of period 1,664 105 1,389
-------------------------------------- ----- ------------ ------------ -----------------
Comprising:
Cash and cash equivalents 1,664 183 1,389
Overdrafts - (78) -
--------------------------------------------- ------------ ------------ -----------------
1,664 105 1,389
--------------------------------------------- ------------ ------------ -----------------
Notes to the half-yearly financial information
1. Basis of preparation and general information
The interim financial information is unaudited. This condensed
consolidated interim financial information was approved by the
Directors and authorised for issue on 5 November 2019.
The Company is a public limited liability company incorporated
and domiciled in England. The address of its registered office is
Castleton Technology plc ("Castleton"), The Walbrook Building, 25
Walbrook, London, England, EC4N 8AF. The Company is listed on the
AIM market of the London Stock Exchange.
The principal activity of the Group during the period was the
provision of software and managed services to the public and
not-for-profit sectors, predominantly the social housing
sector.
Castleton and its subsidiaries have not applied IAS 34, Interim
Financial Reporting, which is not mandatory for UK AIM listed
companies, in the preparation of this half-yearly financial
report.
This condensed, consolidated interim financial information for
the six months ended 30 September 2019 does not comply, therefore
with all the requirements of IAS 34, 'Interim financial reporting'
as adopted by the European Union. The consolidated interim
financial information should be read in conjunction with the annual
financial statements of Castleton for the year ended 31 March 2019,
which have been prepared in accordance with IFRS as adopted by the
European Union.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
March 2019 were approved by the Board of directors on 18 July 2019
and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under sections 498 (2) or (3) of the Companies Act 2006.
Accounting policies
The accounting policies used in the preparation of the financial
information for the six months ended 30 September 2019 are in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. The accounting policies applied by the Group in
these condensed consolidated interim financial statements are the
same as those set out in the Group's Annual Report for the year
ended 31 March 2019, except for the adoption of IFRS 16 and as
described in note 2, and will be applied for the year ending 31
March 2020. This is the first set of financial statements where
IFRS 16 has been applied and the Group has adopted IFRS 16 from 1
April 2019.
While the financial information included has been prepared in
accordance with the recognition and measurement criteria of IFRS,
as adopted by the European Union (EU), these financial statements
do not contain sufficient information to comply with IFRSs.
Going concern
The consolidated interim financial information of Castleton has
been prepared on the going concern basis.
The Directors have prepared detailed cash flow projections
including sensitivity analysis on key assumptions. The Group's
forecasts and projections, taking account of reasonably possible
changes in trading performance and the timing of key strategic
events, show the Group will be able to operate within the level and
conditions of available funding. 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 the consolidated financial information.
Revenue recognition
The Group 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 Group 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.
Standard payment terms are thirty days after the date of the
invoice. This does not prevent the customer from withholding
payment of any amount of an invoice which is the subject of a
genuine and bona fide dispute. Standard warranty terms are 90 days
from the delivery date.
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 and revenue is recognised as
the performance obligation is met. 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 Group 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 Group 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 Group 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.
IFRS 16
Previously leases of property, plant and equipment were
classified as either finance or operating leases under IAS 17.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease.
Under IFRS 16 which the Group has adopted effective for the
period starting 1 April 2019, leases are recognised as a
right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and the finance
cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The
right-of-use asset is depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis.
The Group has applied IFRS 16 on a cumulative catch up basis
with practical expedients from the date of initial application (1
April 2019), without restatement of comparative amounts.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics.
-- The accounting for short term operating leases under IAS 17,
for leases with a remaining lease term of less than twelve months
as at the initial application date
-- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
-- The application of IFRS 16 to only those operating leases
accounted for under IAS 17 as at the initial application date
Quantitative impact of IFRS 16 adoption
The quantitative impact of IFRS 16 on the interim 2020 financial
statements is;
-- A reduction in administrative costs of GBP0.243 million for
the period ended 30 September 2019
-- An increase in depreciation of GBP0.227 million, for the period ended 30 September 2019
-- An increase in finance costs of GBP0.017 million, for the period ended 30 September 2019
-- On transition right of use assets of GBP1.217 million
recognised. At 30 September 2019 right of use assets of GBP0.992
million
-- On transition lease liabilities of GBP1.250 million
recognised. At September 2019 lease liabilities of GBP1.025 of
which GBP0.453 million is current and GBP0.572 million is
non-current
-- Adjustment to equity at 1 April 2019 of GBP0.03 million
-- No deferred tax asset has been recognised as the transitional
effect on opening reserves is immaterial
2. Prior year restatement
Restatement of Consolidated Statement of Comprehensive
Income
Following the merger of the Software Solutions and Managed
Services divisions in April 2019, the Directors have changed the
allocation of costs between administration expenses and cost of
sales used in management reporting and the Consolidated Statement
of Comprehensive Income now reports in the same way. The prior year
(ending 31 March 2019) and the prior six months (ending 30
September 2018) have been restated so they are comparable to the
figures for the six months ending 30 September 2019. This
restatement has reduced gross profit by GBP1.2 million in the six
months ending 30 September 2018 and by GBP2.9 million for the year
ending 31 March 2019. EBITDA, Adjusted EBITDA* and operating profit
remain unchanged for both periods.
Restated
Unaudited Unaudited
six months six months
ended 30 Sept ended 30
2018 Restatement Sept 2018
GBP000 GBP000 GBP000
------------------------- --------------- ------------ ------------
Cost of sales (4,222) (1,459) (5,681)
Administrative expenses (8,072) 1,459 (6,613)
-------------------------- --------------- ------------ ------------
Restated
Audited Audited
year ended year ended
31 March 31 March
2019 Restatement 2019
GBP000 GBP000 GBP000
------------------------- ------------ ------------ ------------
Cost of sales (7,319) (3,540) (10,859)
Administrative expenses (17,238) 3,540 (13,698)
-------------------------- ------------ ------------ ------------
Restatement in respect of IFRS 15 (Revenue from contracts with
customers)
The Group adopted IFRS 15 on a cumulative effect basis with
practical expedients from the date of initial application (1 April
2018), without restatement of comparative amounts. Subsequent to
the Group's 2019 Interim Results for the period ended 30 September
2018, further reviews of customer contacts identified adjustments
needed to the opening transition balances as well as a deferred tax
asset to be recognised. This resulted in the amendment of the
Group's opening transition adjustment within the consolidated
financial statements for the year ended 31 March 2019. The impact
on the Consolidated Financial Position as at 30 September 2018 is
set out in the table below. There was no material impact on the
Consolidated Statement of Comprehensive Income and therefore no
restatement.
Restated
Unaudited Unaudited
six months six months
ended 30 Sept ended 30
2018 Restatement Sept 2018
GBP000 GBP000 GBP000
----------------------------- --------------- ------------ ------------
Non-current assets
Trade and other receivables 539 (88) 451
Deferred tax asset 1,410 100 1,510
------------------------------ --------------- ------------ ------------
Current assets
Trade and other receivables 6,583 (127) 6,456
------------------------------ --------------- ------------ ------------
Equity and liabilities
Accumulated loss (7,386) (168) (7,554)
------------------------------ --------------- ------------ ------------
Current liabilities
Trade and other payables 11,343 39 11,382
Non-current liabilities
Trade and other payables 1,506 14 1,520
------------------------------ --------------- ------------ ------------
3. Segment reporting
To create a truly 'one Castleton' structure, the decision had
been made to merge the Software Solutions and Managed Services
divisions, so that the single entity is able to deliver a unified,
seamless and enhanced customer experience. Following this
integration, the Group no longer has any separable segments to
report.
4. Revenue by products and services
Analysis of revenue by category is as follows:
Unaudited six months Unaudited six months
ended 30 September 2019 ended 30 September 2018 Audited year
ended 31
GBP000 GBP000 March 2019
GBP000
-------------------------------- ------------------------ ------------------------ --------------
Recurring revenue 7,624 7,048 15,356
Fees from professional services 2,561 2,650 5,631
Hardware and one-off revenue 1,449 3,213 5,370
-------------------------------- ------------------------ ------------------------ --------------
Total revenue 11,634 12,911 26,357
-------------------------------- ------------------------ ------------------------ --------------
5. Exceptional items
Exceptional Exceptional 30 September 2019 Exceptional Exceptional 31 March 2019
Credits Charges Total Credits Charges Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ----------- ----------- ----------------- ----------- ----------- -------------
Integration and strategic costs - - - - 5 5
Acquisition costs (18) - (18) - 314 314
Reorganisation costs - 333 333 - - -
Restructuring - - - (11) - (11)
-------------------------------- ----------- ----------- ----------------- ----------- ----------- -------------
(18) 333 315 (11) 319 308
-------------------------------- ----------- ----------- ----------------- ----------- ----------- -------------
6. Taxation
Tax on profit on ordinary activities
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 2019
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------ ------------
Corporation Tax
Current tax on profit for the period (250) 174 (286)
Adjustment in respect of prior
period (542) - (636)
Deferred tax
Origination and reversal of timing
differences 81 (221) (1,982)
Total tax credit (711) (47) (2,904)
-------------------------------------- ------------ ------------ ------------
The rate of UK corporation tax for the year beginning 1 April
2019 is 19%. From the year starting 1 April 2020 the UK corporation
tax rate drops to 17%. Deferred tax has been measured on the basis
of these rates and reflected in the financial statements.
Current tax on the profit for the period represents an estimated
R&D tax credit for the period to 30 September 2019. Following
the receipt of tax credits from FY16 and FY17 claims, revised
estimates for FY18 and FY19 claims have been adjusted for of GBP0.5
million.
7. Earnings per share
Basic earnings per share and diluted earnings per share are
calculated using a weighted average number of shares of 81,582,971
and 88,385,059 respectively (30 September 2018: weighted average
number of shares of 79,946,725 and 83,927,452 respectively and at
31 March 2019: weighted average number of shares of 80,659,635 and
88,097,141 respectively).
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 2019
Basic earnings per share 0.63p 0.68p 5.08p
Fully diluted 0.58p 0.65p 4.81p
-------------------------- ------------ ------------ ------------
8. Trade and other receivables
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 restated* 2019
GBP000 GBP000 GBP000
----------------------------------- ------------ ---------------- ------------
Current
Trade receivables 3,733 4,255 6,054
Less: provision for impairment of
trade receivables (267) (236) (262)
----------------------------------- ------------ ---------------- ------------
Trade receivables - net 3,466 4,019 5,792
Other receivables 58 128 122
Contract assets 1,526 1,461 1,440
Prepayments 1,325 848 1,054
----------------------------------- ------------ ---------------- ------------
6,375 6,456 8,408
----------------------------------- ------------ ---------------- ------------
Non-current
Trade receivables - 39 -
Prepayments 21 105 29
Contract assets 190 307 259
----------------------------------- ------------ ---------------- ------------
211 451 288
----------------------------------- ------------ ---------------- ------------
* restated in respect of IFRS 15 as described in note 2. Current
contract assets restated from GBP1,588,000 to GBP1,461,000.
Non-current contract assets restated from GBP395,000 to
GBP307,000.
9. Trade and other payables
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 restated* 2019
GBP000 GBP000 GBP000
------------------------------ ------------ ---------------- ------------
Current
Trade payables 869 1,409 2,040
Other payables 400 282 448
Taxation and social security 634 1,057 932
Accruals 1,898 1,306 2,173
Income tax payable 49 43 54
Contract liabilities 7,372 7,285 8,282
------------------------------ ------------ ---------------- ------------
11,222 11,382 13,929
------------------------------ ------------ ---------------- ------------
Non-current
Contract liabilities 992 1,261 962
Accrued interest 401 259 342
------------------------------ ------------ ---------------- ------------
1,393 1,520 1,304
------------------------------ ------------ ---------------- ------------
* restated in respect of IFRS 15 as described in note 2. Current
contract liabilities restated from GBP7,246,000 to GBP7,285,000.
Non-current contract assets restated from GBP1,247,000 to
GBP1,261,000.
10. Net cash flows from operating activities
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 2019
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------ ------------
(Loss)/Profit on ordinary activities
before tax (199) 497 1,192
Adjustments for:
Exceptional items 315 - 308
Net finance costs 221 120 300
Depreciation of property, plant
and equipment 336 183 453
Depreciation of right of use assets 227 - -
Amortisation of intangible assets 1,763 1,566 3,238
Equity-settled share based payment
charge 274 603 834
-------------------------------------- ------------ ------------ ------------
2,937 2,969 6,325
Movements in working capital:
Decrease/(increase) in trade and
other receivables 2,074 457 (1,233)
(Decrease)/increase in trade and
other payables (2,637) (384) 1,256
(Increase)/decrease in provisions (33) - 160
Decrease)/increase in inventories - (15) 2
Foreign exchange losses on operating
activities - - (8)
-------------------------------------- ------------ ------------ ------------
(596) 58 177
-------------------------------------- ------------ ------------ ------------
Cash generated from operations
before exceptional items 2,341 3,027 6,502
-------------------------------------- ------------ ------------ ------------
11. Net debt
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2019 2018 2019
GBP000 GBP000 GBP000
------------------------------------- ------------ ------------ ------------
Cash 1,664 183 1,389
Overdraft - (78) -
Barclays loan (3,357) (2,750) (4,000)
Mortgage (89) (96) (93)
Lease liabilities (1,025) - -
------------------------------------- ------------ ------------ ------------
Net debt before loan notes and
deferred/contingent consideration (2,807) (2,741) (2,704)
Loan notes and accrued interest
on loan notes* (2,303) (2,155) (2,225)
------------------------------------- ------------ ------------ ------------
Net debt before deferred/contingent
consideration (5,110) (4,896) (4,929)
Deferred consideration - (435) (150)
Net debt (5,110) (5,331) (5,079)
------------------------------------- ------------ ------------ ------------
* Accrued interest on loan notes is presented within "Accrued
Interest" in Trade and other payables.
Advisers
Nominated Adviser and Broker
FinnCap, 60 New Broad Street London, EC2M 1JJ
Auditors
RSM UK Audit LLP, St Philips Point, Temple Row, Birmingham, West
Midlands, B2 5AF
Solicitors
Beachcroft LLP, The Walbrook Building, 25 Walbrook, London,
England, EC4N 8AF
Registrars
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham,
Kent, BR3 4TU
Principal Bankers
Barclays Bank plc, 1 Churchill Place, London, E14 5HP
Company Number
03336134
Further details can be found on the Castleton website at the
following address: www.castletonplc.com
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
IR DDBDBUGGBGCS
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November 05, 2019 02:00 ET (07:00 GMT)
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