TIDMNASA
RNS Number : 7415B
Nasstar PLC
24 September 2018
24 September 2018
Nasstar plc ("Nasstar")
Interim results correction
In the Interim results released today at 07.00 under RNS Number
6207B the Condensed Consolidated Statement of Cash Flow contained
two lines in which the relevant numbers were transposed in error.
The two lines concerned with the correct numbers are as
follows:
Acquisition of property, plant and equipment (1,318) (568) (1,583)
Repayment of bank loan (677) (968) (1,355)
No subtotals or consequential calculations were affected by this
error. In all other respects this morning's announcement remains
unaffected and is reproduced below in full:
Nasstar plc
Interim results for the 6 months ended 30 June 2018
Nasstar plc ("Nasstar", the "Company" or the "Group"; stock
code: NASA), a provider of hosted managed and cloud computing
services, announces its unaudited interim results for the 6 months
ended 30 June 2018.
Financial Highlights
-- Revenue up 6% compared to the same period last year to GBP12.5m (H1 2017: GBP11.8m)
-- 91% of H1 2018 revenue generated from contracted recurring services (H1 2017: 92%)
-- EBITDA* up 33% compared to the same period last year to GBP2.8m* (H1 2017: GBP2.1m)
-- Adjusted EBITDA** up 16% compared to the same period last
year to GBP3.0m** (H1 2017: GBP2.6m)
-- 65% reduction in operating loss compared to the same period
last year to GBP0.3m (H1 2017: GBP0.9m)
-- Adjusted Profit Before Tax*** up 24% compared to the same
period last year to GBP1.8m (H1 2017: GBP1.5m)
-- 58% reduction in reported Loss Before Tax compared to the
same period last year GBP0.4m (H1 2017 GBP1.1m)
-- Net cash position remained stable at GBP0.9m from 2017 year end
-- Adjusted earnings*** per share 0.3p for 6 months to 30 June 2018 (H1 2017: 0.2p)
-- Basic loss per share 0.1p for 6 months to 30 June 2018 (H1 2017: 0.2p)
-- IFRS 9,15 and 16 adopted as at 1 January 2018
-- Interim and full year accounts for 2017 have been restated throughout
*Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets and amortisation
**comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets, amortisation, share
based payments and exceptional items (being costs in relation to
reorganisation and data centre closure)
***adjusted for amortisation of acquired intangibles, share
based payments and exceptional items
Operational Highlights
-- Year two of the "Nasstar 10-19" plan continued with further
investment in key strategic areas designed to:-
o secure future long term growth
o improve efficiencies and margins
o retain competitive edge in a fast-moving market
-- Continued refinement of the organisational structure
instigated in 2017 aimed at delivering an integrated company with
one team for each function managed by a single leadership team.
-- The implications of IFRS 15 are that contract setup revenues
are spread over the full term of the customer contract rather than
being recognised at the point of installation (2017 revenue
reduction of GBP0.4m). The cost of the install is recognised as an
asset with the cost recognised over the contract term in line with
revenue. Therefore, in order to expedite revenue delivery, the
leadership team chose to invest into additional engineering
resource.
-- The result of the investment in engineering has enabled
Nasstar to deliver the 1,000 users contract announced in November
'17 and recognise contract revenue within a shorter timescale. The
organic business development pipeline continues to include
prospects of a similar size to this contract.
-- As part of the "Nasstar 10-19" programme the Singapore data
centre was closed during H1, with Microsoft Azure ("Azure") being
utilised for the remaining workloads. Plans continue to be executed
to consolidate the UK data centre footprint by a further two data
centres. This consolidation is complex and ongoing. The server farm
rationalisation is expected to complete fully in 2019.
-- As part of the strategy to standardise offerings across the
Group, Nasstar launched its new Cloud Communications Service
(hosted telephony) based on Mitel's MiCloud Flex solution. Early
traction with the new service has been strong with three orders
secured in the first quarter of service launch.
Nigel Redwood, Chief Executive Officer of Nasstar,
commented:
"2018 saw the first year of operating under our new
organisational structure and this combined with three large
projects has really tested the team, which I am delighted to say
has responded to the challenge.
We have invested in the technical delivery teams to increase
project throughput whilst continuing to focus on the "Nasstar
10-19" strategic initiatives. We are in year two of our three-year
plan to achieve full integration and consolidation and I continue
to be confident in the "Nasstar 10-19" objectives.
I have worked closely with the new business team to develop a
sales pipeline that continues to include deals of larger size and
believe Nasstar is perfectly positioned and better structured to
deliver on projects of increased complexity and size."
For further information, please contact:
Nasstar plc +44 (0) 1952 225 000
Nigel Redwood, Chief Executive Officer
Niki Redwood, Finance Director
finnCap Limited (Nominated Adviser & Broker) +44 (0) 20 7220 0500
Julian Blunt, James Thompson (Corporate Finance)
Alice Lane (Corporate Broking)
IFC Advisory Limited (Financial PR & IR) +44 (0) 20 3934 6630
Tim Metcalfe
Miles Nolan
Zach Cohen
Chairman's Statement
I am pleased to report that H1 2018 has continued to show
improvements in all our key KPI's with contracted recurring
revenues representing 91% of the total and revenues growing by 6%
for the period. The period saw a 65% reduction in Operating Loss
being reported whilst EBITDA increased by 33% clearly demonstrating
tangible improvement.
New priorities for 2018 were set in relation to the "Nasstar
10-19" programme in what is a critical second year of our
three-year strategic plan. It is pleasing to see that the
leadership team has continued to focus on such a strategy in what
has been a very busy year. Of note in that area was the successful
delivery of the 1,000 seat fully managed public/private Hybrid
cloud solution combined with two other ongoing complex
projects.
Work in progress (WIP), being orders signed but not yet
delivered (or recognised in revenue), continues to keep the project
team busy with in excess of GBP50,000 monthly recurring revenue in
WIP at the end of June 2018. This continues to demonstrate the
strong visibility of earnings of the model.
At Nasstar we recognise that attracting and retaining the right
talent is key to our success and future health and therefore the
"10-19" priority that focuses on talent management gives me
confidence that we continue to plan for the long term.
On behalf of the board I would like to express my gratitude to
all new and old team members alike for their continued hard work
and commitment.
Outlook
The protracted BREXIT process continues to create an uncertain
economic climate, the tangible effect of which for Nasstar has been
the lengthening of the decision-making process seen in some
opportunities in the new business pipeline, more notable with
professional services opportunities. With that in mind however,
Nasstar remains well positioned, benefiting from high levels of
recurring revenue, providing an essential service to its
clients.
Continued focus on and investment in the "Nasstar 10-19"
programme continues to deliver an ever-improving service,
delivering efficiencies whilst ensuring the business delivers new
and relevant innovative solutions to the vertical markets that it
targets. This continues to put Nasstar on solid foundations
contributing to the long term positive outlook of the business.
Lord Daresbury
Chairman
Business Review
Overview of the Business
The Group is a provider of hosted managed and cloud computing
services. We integrate private and public clouds, supplying a
robust, secure and stable hosted information technology service to
business customers. The Group provides a true end to end service
for clients providing them with enhanced IT performance and greater
cost control over their IT function. The Group owns its primary
data centre, is head quartered in Telford, UK, with regional
offices in Northampton, London and Bournemouth whilst 24 x 7
support is delivered from its Auckland office in New Zealand.
Nasstar is an accredited Microsoft Gold Partner, a Tier 1
multi-region Cloud Solution Provider (CSP) partner for Microsoft
Office 365 ("O365) and Azure, an authorised Citrix CSP Partner,
ITIL (a set of detailed practices for IT service management)
aligned and is certified to ISO 27001.
Nasstar specialises in building bespoke cloud hosted services to
manage a client's entire application set, tailor made to suit
specific industries, designing public, private and hybrid cloud
solutions to meet the objectives of the client. Public cloud
solutions utilise services from multinational vendors such as
Microsoft ("O365" and "Azure"), private cloud solutions are
delivered from Nasstar owned and controlled infrastructure whilst
Hybrid solutions are an integrated combination of the two. The
solution is a highly scalable service that provides benefits
including "Anywhere Access" to computing; a standardised corporate
solution that can be accessed globally in multiple languages;
generating cost savings when compared to the traditional IT
ownership model whilst replacing capital expenditure with a simple
usage-based payment model.
The bespoke cloud hosted services include a comprehensive
portfolio of solutions, offering Hosted Desktop, O365, Hosted
Exchange, Software as a Service (SaaS), Infrastructure as a Service
(IaaS), Azure and Hosted Telephony services. Additionally, the
Group hosts a wide variety of software applications on behalf of
clients. Further, the Group provides managed networks and an
extensive end user support service. All such services are supplied
on a price per user per month basis, building a strong long term
recurring revenue relationship with clients.
The Group holds a tier one agreement to sell Microsoft's cloud
offerings known as O365 and Azure. The programme enables the Group
to supply O365 on a truly flexible per user per month model, with
the Group contracting with the end user and retaining full
invoicing and customer support. In addition, Nasstar is Shared
Computer Activation (SCA) accredited. This SCA accreditation
enables Nasstar to integrate O365 fully with hybrid platforms.
Nasstar are one of only a few Microsoft partners that hold such
accreditation. This has enabled the Group to deeply integrate the
O365 offering into its hosted desktop solution, embracing the
innovations of O365 as a clear differentiator over its competitors.
In addition, the Cloud Solution Programme (CSP) enables the Group
to benefit from the economies derived from the use of the Azure
platform, Microsoft's hyper scale IaaS offering.
Through our central Professional Services Team, Nasstar provides
consultancy services on business processes and application
development to its clients in its targeted vertical markets. The
team has an in-depth knowledge of the feature set of O365. This
enhances its added value service to its managed service client
base. In addition, through its exclusive sector focus, Nasstar has
built strong relationships with the specialist software providers
(authors), thus enabling it to offer clients a one-stop solution
for all their essential applications.
Nasstar recognises that cyber security continues to be a rapidly
changing landscape and therefore bolsters its internal capabilities
by partnering with a specialist in this area, Falanx Group Limited
(Falanx). Falanx supplies protective monitoring services and cyber
incident response support for Nasstar as well as additional
consulting services for customers. Nasstar puts security at the
heart of all operations, service and produce design. Cyber Defence
as a Service for clients continues to be a growing service line
adopted by the customer base.
Strategy
Targeting specific verticals and a clear strategy of creating
long standing relationships with clients continues to be a focus of
the Group. This is enhanced by the strategy to add more value for a
client during the life of a contract through the delivery of more
services to meet the client's changing needs. As a result
investment has continued in the Group's account management and
service acceptance function in order to ensure the complete service
portfolio of the entire Group is available to all clients.
Nasstar's growth strategy is underpinned by its vertical market
specialism and operational focus. Nasstar specialises in delivering
services to seven vertical markets, two of which (Legal and
Recruitment) form the cornerstone of the customer base. We have
invested heavily in developing the skills and know-how to service
these cornerstone verticals and are now replicating the go to
market strategy that has worked well in Legal and Recruitment to
the other five verticals (Financial Services, Property Services,
NFP/Education, Media and Energy/Logistics).
The Group's acquisitive strategy, launched in 2014, was driven
by the desire to add additional service portfolio capability and as
a result Nasstar can now deliver an end to end managed service.
From the client computer on the end users' desk, through the
network, telephony and hosting of applications and data,
progressing up through the value chain to application consultancy
services and development. As a result of this end to end
capability, Nasstar's strategy continues to focus on integrating
its acquired businesses and services in order to produce one
company in organisation as well as name.
In 2017 we launched our "Nasstar 10-19" programme designed to
bring about increased strategic focus across the entire Nasstar
business to achieve specific goals by the end of 2019, with a view
to unifying the Group in structure, process and name.
Continuing the strategic momentum, in year two of this
three-year programme we launched the priority projects for 2018
that are all designed to deliver a continually improving customer
service and efficiencies in delivery. The progress in H1 against
the priority projects for 2018 is as follows:
-- Priority objective: A continuation of the single leadership
team and single team for each function philosophy, with clear focus
on continuing to embed the right management structure acting on the
right management information and KPI's. H1 activities against this
objective included:-
o Invested in management training and team leader training
o Improved the leadership team's business cadence combining
strategy development and tactical execution
-- Priority objective: A continuation of the consolidation of
the technical platforms and the development of a new platform based
on the best available hybrid technologies, with the goal of
facilitating full technical consolidation of all customer systems
across the company. H1 activities against this objective
included:-
o Closure of Singapore data centre migrating remaining workloads
to Azure
o Investment into expanding current platform to enable
consolidation
o R&D team established to work on next generation hybrid
design
-- Priority objective: To embed further the Nasstar security
centric culture, placing "security at the heart" of all processes
and technologies. H1 activities against this objective
included:-
o Evolved a closer partnership with Falanx Group Limited,
Nasstar's security partner
o Introduced mandatory multi factor authentication for all new
clients and rebuilds
o Rolled out an enhanced internal information security programme
training regime
o Employed additional security qualified resource
-- Priority objective: We recognise that the management of
talent is a significant contributor to the success and health of
the business. The competitive landscape for attracting technical
skills is more challenging than ever and, as a result, further
investment is being made into our training and development
strategy, health and wellbeing strategy, employee engagement
techniques and apprenticeship programmes. All are designed to help
attract and retain the best talent in the industry. H1 activities
against this objective included:-
o Launched a new health and wellbeing programme
o Invested in additional HR resource focused on talent
management
o Increased training budget across all technologies
-- Priority objective: Investment into product strategy and
service acceptance to ensure that innovation continues to be at the
heart of our service capability, ensuring that our strategic
product direction is well mapped in what is a very fast-moving
sector. H1 activities against this objective included:-
o Head of Commercial Strategy role established to lead service
acceptance and vendor management
o Creation of dedicated technical pre-sales team for new
services
o Launch of Nasstar's new cloud communications offering based on
Mitel's MiCloud Flex solution
-- Priority objective: Investment in automation and systems
integration continues in 2018 with the roll out of Cherwell being
pivotal to further integration benefits being recognised. H1
activities against this objective included:-
o Post period end recruited a new Head of Internal Systems and
allocated a budget for an increased team dedicated to system
automation
o Continued with the project to roll out our new central ITSM
(IT Service Management) solution Cherwell, which is ongoing into
H2
-- Priority objective: Nasstar will continue to focus on its
vertical markets, defining deeper and more selective criteria upon
which to target customers. In addition, structured account plans
for key customers are designed to ensure our long-term
relationships with clients are maintained. H1 activities against
this objective included:-
o Invested in desk-based account management team to proactively
manage smaller clients, freeing field-based account managers to
focus on key strategic accounts
-- Priority objective: We will continue to invest in automation
and improved processes and technical capabilities in our delivery
teams in order to further decrease the on boarding time for
clients. H1 activities against this objective included:-
o Full install process review was launched in H1
o Post period end, a new Head of PMO (Project Management Office)
was employed, bringing considerable experience of project and
process improvement to a complex technical delivery
o Post period end, investment made into resource management
tools giving a central view of all resource and projects
Financial Review
The directors regularly review monthly revenue and operating
costs to ensure that sufficient cash resources are available for
the continued development and support of its service. Primary KPIs
at the period end were as follows:
6 mths to 6 mths 12 mths
30 June to to
18 30 June 31 Dec
GBP'000 17 17
GBP'000 GBP'000
restated restated
Total revenue 12,493 11,796 24,080
Recurring revenue 11,362 10,865 21,879
Recurring % of total reported revenue 91% 92% 91%
Monthly recurring revenue at end
of period 1,914 1,810 1,889
Operating costs, including cost of
sales 10,546 10,186 20,740
Gross profit percentage 67% 69% 68%
EBITDA* 2,841 2,139 4,802
Adjusted EBITDA** 3,005 2,592 5,274
EBITDA* % of revenues 23% 18% 20%
Adjusted EBITDA** % of revenues 24% 22% 22%
Operating Loss (330) (942) (1,357)
Loss before tax (447) (1,071) (1,590)
Adjusted Profit before tax*** 1,830 1,481 3,107
Current assets (excluding cash) 4,371 3,799 3,924
Current liabilities 8,997 8,155 8,885
Cash and cash equivalents 4,282 3,650 5,101
Loss per share (0.1p) (0.2p) (0.2p)
Adjusted earnings per share*** 0.26p 0.22p 0.46p
See "Alternative Performance Measures" for descriptions of
performance measures presented above.
Revenue for the period was GBP12.5m representing year on year
growth of 6%. EBITDA* and Adjusted EBITDA** percentages have been
included in key performance indicators to demonstrate the year on
year movement in these margins as a result of the strategic
initiatives implemented under the "Nasstar 10-19" program. Monthly
recurring revenue at the end of the period is the revenue
recognised in the income statement in the final month of the
reporting period from the long term recurring revenue
contracts.
Recurring Revenue
Recurring revenue is monthly revenue generated from long term
contracts, initial terms being three to five years in length.
Nasstar's recurring revenue is predominantly generated from complex
managed services where Nasstar deliver a customer's entire
application portfolio and data from a private and/or public cloud
solution. Nasstar generates additional recurring revenues from
these contracts by upselling add on services such as managed
networks, hosted telephony and support services. These additional
services are very rarely sold without the complex managed hosting
element and therefore the vast majority of Nasstar recurring
revenue is generated from its complex managed hosted solutions.
Gross margin reduced to 67% from 69% in full year 2017,
primarily due to increased licence costs and the continued pressure
on exchange rates, therefore the margin on some hosted licences has
reduced. An initiative to mitigate this pressure is being
undertaken as part of the product strategy work started during the
period, but is not expected to bear fruits until next year.
Adjusted EBITDA** margins reflect the "Nasstar 10-19"
consolidation programme leveraging our largest cost, the cost of
people, together with savings from restructuring and closure of one
further data centres.
Reported loss before tax was GBP0.4m after exceptional expenses
of GBP148,000 which were largely costs in relation to the closure
of one data centre and the continued data centre rationalisation
programme.
In addition, GBP2.1m of amortisation of customer contracts has
been charged to the Consolidated Statement of Profit and Loss in
respect of acquired customer contract intangible assets.
As previously reported capital expenditure during 2018 is
running at a higher level than 2017 as we continue to deliver our
"Nasstar 10-19" initiatives. 2018 has also seen the Group, due to
its increased size, move to an alternative VAT payment basis which
has led to a one-off cash outflow.
Fixed asset additions for the period were GBP1.6m. This was
primarily servers and storage area network infrastructure to
provide a platform for future growth and technology consolidation,
together with investment needed in fixed assets on the new signing
of customer contracts. Depreciation increased to 9% of sales from
7% in full year 2017 due to the increased depreciation charge on
adoption of IFRS16.
Alternative Performance Measures
6 mths to 6 mths to 12 mths
30 June 30 June to
18 17 31 Dec
GBP'000 GBP'000 17
restated GBP'000
restated
Loss before tax (447) (1,071) (1,590)
Amortisation of acquired intangibles 2,113 2,099 4,225
Share based payments 16 42 40
Exceptional items 148 411 432
---------- ---------- ----------
Adjusted Profit before tax*** 1,830 1,481 3,107
========== ========== ==========
Operating Loss (330) (942) (1,357)
Depreciation and amortisation 3,190 3,081 6,163
Profit on sale of fixed assets (19) - (4)
---------- ---------- ----------
EBITDA* 2,841 2,139 4,802
Share based payments 16 42 40
Exceptional items 148 411 432
---------- ---------- ----------
Adjusted EBITDA** 3,005 2,592 5,274
========== ========== ==========
Cash and cash equivalents 4,282 3,650 5,101
Interest bearing liabilities(excluding
IFRS16 lease liability) (3,381) (4,638) (4,148)
---------- ---------- ----------
Net Cash/(Debt) 901 (988) 953
========== ========== ==========
Revenue from managed services
- Recurring revenue 11,362 10,865 21,879
Consultancy services 547 581 1,107
Adhoc sales of hardware, software
and other recharges 584 350 1,094
---------- ---------- ----------
Total Revenue 12,493 11,796 24,080
========== ========== ==========
Adjusted earnings per share were 0.26p*** (2016:0.22p***) with a
statutory loss per share recorded of 0.1p (2016:0.2p) as a result
of the exceptional items and amortisation charges. Adjusted
earnings per share has been calculated as follows:
6 mths 6 mths to 12 mths
to 30 June to
30 June 17 31 Dec
18 GBP'000 17
GBP'000 restated GBP'000
restated
GBP000 GBP000 GBP000
Loss for the period (404) (898) (1,344)
Amortisation of acquired intangibles
net of tax impact 1,754 1,742 3,507
Share based payments 16 42 40
Exceptional items 148 411 432
------------ ------------ ------------
Adjusted earnings 1,514 1,297 2,635
============ ============ ============
Weighted average number of shares 574,262,743 579,021,565 576,360,096
Adjusted earnings per share 0.26p 0.22p 0.46p
In order to provide useful information about the Group's
performance and to present information in a way that reflects how
the Directors monitor and measure the performance of the Group, the
Directors believe it is appropriate to present the results of the
Group using selected alternative performance measures.
The following provides an indication of the purpose and
definition of each of the alternative performance measures
presented, together with an appropriate reference to IFRS measures
presented in the IFRS financial statements, where applicable.
Adjusted profit before tax is shown as an alternative
performance measure to present the underlying trading performance.
The calculation excludes the impact of the non-cash items of
amortisation of customer contracts and share based payments as well
as eliminating one off exceptional items from the trading
performance.
Monthly recurring revenue at each month end represents the
monthly revenue contracted to clients under managed service
contracts which reflects revenue contracted but not yet delivered.
Monthly revenue from these contracts is recognised on a
straight-line basis over the life of the contract. Monthly
recurring revenue at the year-end gives an indication of the
revenue likely to be recognised from these contracts in future
months.
Recurring percentage of total reported revenue is the total
revenue recognised in the period from recurring revenue contracts
as a percentage of total revenue.
Net debt is calculated in these interim results as cash less
interest-bearing loans and borrowings, excluding IFRS 16 lease
liabilities for the purposes of comparison to prior periods.
* Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets and amortisation.
**Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets, amortisation, share
based payments and exceptional items (being costs in relation to
acquisitions during the year, reorganisation costs, share
repurchase costs and provisions).
***Adjusted for amortisation of acquired intangibles, share
based payments and exceptional items.
New IFRS implementation
Impact of adoption of IFRS 15 (Revenue from Contracts with
Customers)
IFRS 15 Revenue from Contracts with Customers, is effective for
periods beginning on or after 1 January 2018. The standard has been
adopted by the Group for the first time in the period ending 30
June 2018. The group has applied IFRS 15 retrospectively to each
prior reporting period and has utilised certain practical
expedients available in IFRS 15.
The adoption of IFRS 15 has not altered the total contract value
or timing of cashflows, but there are three key areas where the
adoption of IFRS 15 has changed historic revenue recognition:
1. Technical installation, consultancy and set up fees
Under previous accounting policies, revenue from technical
installation, consultancy or other one off set- up fees was
recognised up-front at the point of implementation. Under IFRS 15,
technical installation, consultancy and set-up services that the
Group deliver are not considered to meet the criteria to be a
distinct performance obligation. The fees associated with these
services are therefore combined with other promises in the contract
and recognised over the contract term. This has resulted in a
reduction of initial revenue previously recognised, an increase in
deferred income and an increase in monthly recurring revenue. The
impact for 2017 was a reduction of GBP0.4m in revenue.
In addition, there is a financing component within the set-up
fee on three significant customer contracts. This arises due to
both the size and payment profile of the set-up fee, compared to
the satisfaction of this performance obligation over the life of
the contract. The financing component of the fee has been separated
from the monthly revenue and recognised separately as interest
expense. There has been no change to the net contract value.
2. Workstation equipment
The Group's managed service contracts, on occasion, include the
provision of workstation equipment. The fee for these services is
included within the overall managed service charge which is
invoiced monthly in line with customer usage. Revenue was
historically recognised rateably on a daily basis in accordance
with the services provided.
Under IFRS 15, the provision of workstation equipment is
determined to be a separate performance obligation from the other
services in the contract. However, management has determined that
right to control the use of the equipment does not transfer to the
customer. Hence, there is no upfront 'sale' associated with the
workstation equipment. The income from the satisfaction of the
performance obligation to provide workstation equipment is
recognised straight line over the length of the contract. This is
in line with the current accounting under IAS 11/18.
3. Contract fulfilment assets
The costs associated with the design and construction of the
technology platform for each contract have previously been expensed
to the income statement as incurred. Under IFRS 15, these costs
have been capitalised as contract fulfilment assets, within trade
and other receivables, and amortised over the life of the
contract.
Impact of adoption of IFRS 16 (Leases)
IFRS 16 Leases is effective for periods beginning on or after 1
January 2019. IFRS 16 removes the operating and finance lease
classification in IAS 17 Leases and replaces them with the concept
of right-of-use assets and associated financial liabilities. This
change results in the recognition of a liability on the balance
sheet for all leases which convey a right to use the asset for the
period of the contract. The lease liability reflects the present
value of the future rental payments, discounted using either the
effective interest rate or the incremental borrowing rate of the
entity.
Nasstar plc has early adopted IFRS 16 for the year ending 31
December 2018, applying the cumulative catch up transition
approach.
New Accounting standards
Impact of adoption of IFRS 9 (Financial Instruments)
In adopting IFRS 9, the only changes made from the previous
reporting period is in relation to the impairment of financial
assets. The Group now reviews the amount of credit loss associated
with its trade receivables based on forward looking estimates that
consider current and forecast credit conditions as opposed to
relying on past historical default rates.
Nigel Redwood
Chief Executive Officer
24 September 2018
Condensed consolidated statement of Profit and Loss and other
Comprehensive Income
Note 6 mths to 6mths to 12 mths
30 Jun 18 30 Jun to 31 Dec
Unaudited 17 Unaudited 17 Unaudited
restated restated
GBP000 GBP000 GBP000
Revenue 12,493 11,796 24,080
Cost of sales (4,150) (3,694) (7,681)
Gross profit 8,343 8,102 16,399
Administrative expenses (8,673) (9,044) (17,756)
--------------------------------------------- ------- ---------- ------------- -------------
Share based payments (16) (42) (40)
Amortisation of customer intangibles (2,113) (2,099) (4,225)
Other administrative expenses (6,396) (6,492) (13,059)
---------- ------------- -------------
Administrative expenses before exceptional
items (8,525) (8,633) (17,324)
Operating loss before exceptional items (182) (531) (925)
Exceptional items 4 (148) (411) (432)
Operating loss (330) (942) (1,357)
Financial income - - -
Financial expenses (117) (129) (233)
Loss before tax (447) (1,071) (1,590)
Taxation 5 43 173 246
Loss for the period and total comprehensive
income for the period, attributable
to shareholders (404) (898) (1,344)
========== ============= =============
Loss per share: 7
Basic (0.1p) (0.2p) (0.2p)
Diluted (0.1p) (0.2p) (0.2p)
Condensed Consolidated Statement of Financial Position
at 30 June 2018
6 mths to 6mths to 12 mths
Note 30 Jun 18 30 Jun 17 to 31 Dec
Unaudited Unaudited 17 Unaudited
restated restated
Non-current assets and liabilities GBP000 GBP000 GBP000
Goodwill 15,421 15,421 15,421
Intangible assets 7,526 11,607 9,455
Plant and equipment 5,452 4,889 5,006
Right of Use assets 1,081 - -
Trade and other receivables 486 187 185
----------- ----------- --------------
29,966 32,104 30,067
Current assets
Inventories 119 28 68
Trade and other receivables 4,252 3,771 3,856
Cash and cash equivalents 4,282 3,650 5,101
8,653 7,449 9,025
Total assets 38,619 39,553 39,092
Non-current liabilities
Interest-bearing loans and borrowings 1,908 3,000 2,587
Deferred taxation 927 1,635 1,222
Lease Liabilities 836 - -
Trade and other payables 617 221 304
4,288 4,856 4,113
Current liabilities
Interest-bearing loans and borrowings 1,473 1,638 1,561
Trade and other payables 7,261 6,387 7,278
Lease liabilities 251 - -
Provisions 12 130 46
8,997 8,155 8,885
Total liabilities 13,285 13,011 12,998
Net assets 25,334 26,542 26,094
Equity attributable to equity
holders of the parent
Share capital 5,743 5,743 5,743
Other reserves 19,591 20,799 20,351
Total equity 25,334 26,542 26,094
Condensed Consolidated Statement of Changes in Equity
Merger Capital
Share Share reserve Reduction Retained Total
capital premium reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2017
as previously reported 5,795 22,409 6,016 - (5,981) 28,239
Adjustment on initial application
of IFRS 15 - - - - (81) (81)
-------- -------- -------- ---------- -------- -------
Restated balance at 1 January
2017 5,795 22,409 6,016 - (6,062) 28,158
Comprehensive income
Loss for the period recognised
in profit and loss - - - - (898) (898)
-------- -------- -------- ---------- -------- -------
Total comprehensive income
for the period - - - - (898) (898)
Shares cancelled in the
period (52) - - 52 (461) (461)
Share based payment recognised
in equity - - - - 42 42
Dividend - - - - (299) (299)
-------- -------- -------- ---------- -------- -------
At 30 June 2017 5,743 22,409 6,016 52 (7,678) 26,542
Comprehensive income
Loss for the period recognised
in profit and loss - - - - (446) (446)
-------- -------- -------- ---------- -------- -------
Total comprehensive income
for the period - - - - (446) (446)
Share based payment recognised
in equity - - - - (2) (2)
-------- -------- -------- ---------- -------- -------
At 31 December 2017 5,743 22,409 6,016 52 (8,126) 26,094
Adjustment on initial application
of IFRS 9 - - - - (27) (27)
Comprehensive income
Loss for the period recognised
in profit and loss - - - - (404) (404)
-------- -------- -------- ---------- -------- -------
Total comprehensive income
for the period - - - - (404) (404)
Share based payment recognised
in equity - - - - 16 16
Dividend - - - (345) (345)
-------- -------- -------- ---------- -------- -------
5,743 22,409 6,016 52 (8,886) 25,334
At 30 June 2018
======== ======== ======== ========== ======== =======
Condensed Consolidated Statement of Cash Flows
6 mths to 30 Jun 18 6mths to 30 Jun 17 12 mths to 31 Dec 17
Unaudited Unaudited Unaudited
restated restated
Cash flows from operating
activities
Loss for the period (404) (898) (1,344)
Adjustments for:
Net finance charges 117 129 233
Taxation (43) (173) (246)
Depreciation and
amortisation 3,190 3,081 6,163
Profit on sale of fixed
assets (19) - (4)
Share based payments 16 42 40
Corporation tax payments (21) (65) (123)
Net cash flow from
operating activities
before changes in working
capital 2,836 2,116 4,719
(Increase) in inventories (51) (19) (59)
(Increase)/decrease in
trade and other
receivables (724) 487 406
(Decrease)/increase in
trade and other payables (314) 87 989
Net cash from operating
activities 1,747 2,671 6,055
---------------------------- ---------------------------- ----------------------------
Cash flows from investing
activities
Acquisition of intangible
assets (281) (129) (191)
Acquisition of property,
plant and equipment (1,318) (568) (1,583)
Proceeds on sale of fixed
assets 19 - 34
Net cash from investing
activities (1,580) (697) (1,740)
---------------------------- ---------------------------- ----------------------------
Cash flows from financing
activities
Repayment of lease finance
arrangements (111) (197) (351)
Repayment of bank loan (677) (968) (1,355)
Interest paid (71) (129) (178)
Repayment of lease (127) - -
liability
Dividend paid - - (299)
Net cash from financing
activities (986) (1,294) (2,183)
---------------------------- ---------------------------- ----------------------------
Net (decrease)/increase in
cash and cash equivalents (819) 680 2,132
Cash and cash equivalents
the beginning of the
period 5,101 2,969 2,969
Cash and cash equivalents
at the end of the period 4,282 3,649 5,101
============================ ============================ ============================
Notes to the interim statement
1. Corporate information
Nasstar plc ("the Company") is a company incorporated in England
and Wales and quoted on the London Stock Exchange's Alternative
Investment Market (NASA). Further copies of these results will be
available at the Company's registered office: Datapoint House, 400
Queensway Business Park, Queensway, Telford, Shropshire, TF1 7UL or
on the Company website at www.nasstar.com. These consolidated
interim financial statements were approved by the Board of
Directors on 21 September 2018 at 1700.
2. Basis of preparation
These condensed interim financial statements of the Company and
its subsidiaries ("the Group") for the 6 months ended 30 June 2018
have been prepared using accounting policies consistent with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
These consolidated interim financial statements of the Group are
for the six months ended 30 June 2018. The comparative figures for
the 12-month period ended 31 December 2017 are derived from the
Group's statutory accounts for that financial period, restated for
the implementation of IFRS 15. Those statutory accounts have been
reported on by the Group's auditors and delivered to the Registrar
of Companies. The report of the auditor was (i) unmodified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without modifying its report and
(iii) did not contain a statement under Section 498 of the
Companies Act 2006.
The condensed consolidated interim financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements as at 31 December 2017.
The condensed consolidated interim financial statements for the
six months to 30 June 2018 have not been audited or reviewed by an
auditor pursuant to the Auditing Practices Board guidance on Review
of Interim Financial Information.
The condensed consolidated interim financial statements for the
six months to 30 June 2018 have been prepared on the basis of the
accounting policies expected to be adopted for the year ending 31
December 2018. These are anticipated to be consistent with those
set out in the Group's latest annual financial statements for the
year ended 31 December 2017, along with the application of IFRS 9,
15 and 16. These accounting policies are drawn up in accordance
with International Financial Reporting Standards, International
Accounting Standards (IASs) and International Financial Reporting
Interpretations Committee (IFRIC) interpretations (collectively
IFRSs) as adopted for use in the European Union.
AIM-listed companies are not required to comply with IAS 34
'Interim Financial Reporting' and accordingly the Company has taken
advantage of this exemption.
Forward-looking statements:
This report may contain certain statements about the future
outlook for Nasstar plc. Although the directors believe their
expectations are based on reasonable assumptions, any statements
about future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
Initial application of IFRS 15
IFRS 15 Revenue from contracts with customers, has been adopted
by the group in the current year, with a date of initial
application of 1 January 2018. IFRS 15 requires recognition of
revenue to depict the transfer of promised goods or services to
customers, in an amount that reflects the consideration to which
Nasstar expects to be entitled in exchange for those goods and
services.
The Group has applied IFRS 15 fully retrospectively, restating
the comparatives for year ending 31 December 2017 and adjusting
opening reserves at 1 January 2017. The following practical
expedients have been used on transition to IFRS 15:
-- contracts that were completed at 1 January 2017 have not been restated;
-- contracts which start and end in the same annual reporting
periods have not been restated; and
-- for all reporting periods prior to 2017, the group has chosen
to not disclose the amount of the transaction price allocated to
the remaining performance obligations and an expectation of when it
expects to recognise that revenue.
The impact of adoption to IFRS 15 for each financial statement
line item effected is set out below, along with an explanation of
the key adjustments
2017 Consolidated Statement of Profit and Loss
As reported 31 Dec 2017 Impact of IFRS 15 Restated year ended 31 Dec 2017
GBP000 GBP000 GBP000
Revenue 24,501 (421) 24,080
Cost of Sale (7,681) - 7,681
------------------------ ------------------ --------------------------------
Gross profit 16,820 (421) 16,399
Administrative expenses (17,812) 56 (17,756)
------------------------ ------------------ --------------------------------
Operating Loss (992) (365) (1,357)
Financial expenses (231) (2) (233)
------------------------ ------------------ --------------------------------
Loss before tax (1,223) (367) (1,590)
Tax 175 71 246
------------------------ ------------------ --------------------------------
Loss after tax (1,048) (296) (1,344)
As reported 30 June 2017 Impact of IFRS 15 Restated period ended 30 Jun 2017
GBP000 GBP000 GBP000
Revenue 11,871 (75) 11,796
Cost of Sale (3,694) - (3,694)
------------------------- ------------------ ----------------------------------
Gross profit 8,177 (75) 8,102
Administrative expenses (9,061) 17 (9.044)
------------------------- ------------------ ----------------------------------
Operating Loss (884) (58) (942)
Financial expenses (129) - (129)
------------------------- ------------------ ----------------------------------
Loss before tax (1,013) (58) (1,071)
Tax 162 11 173
------------------------- ------------------ ----------------------------------
Loss after tax (851) (47) (898)
Consolidated Statement of Financial Position at 31 December
2017
As reported 31 December 2017 Impact of IFRS 15 Restated year ended 31 December
GBP000 GBP000 2017
GBP000
Non-current assets
Contract assets - 185 185
Current assets
Contract assets - 254 254
Trade and other receivables 3,798 (196) 3,602
Non-current liabilities
Contract liabilities - 304 304
Deferred tax liability 1,312 (90) 1,222
Current liabilities
Contract liabilities - 2,127 2,127
Trade and other payables 6,872 (1,721) 5.151
Net assets 26,471 (377) 26,094
Consolidated Statement of Financial Position at 1 January
2017
As reported 1 January 2017 Impact of IFRS 15 Restated period ended 1 January 2017
GBP000 GBP000 GBP000
Non-current assets
Contract assets - 159 159
Current assets
Contract assets - 421 421
Trade and other receivables 4,715 (393) 4,322
Non-current liabilities
Contract liabilities - 194 194
Deferred tax liability 1,946 (19) 1,927
Current liabilities
Contract liabilities - 987 987
Trade and other payables 6,014 (894) 5,120
Net assets 28,239 (81) 28,158
Consolidated Statement of Financial Position at 30 June 2017
As reported 30 June 2017 Impact of IFRS 15 Restated period ended 30 June 2017
GBP000 GBP000 GBP000
Non-current assets
Contract assets - 187 187
Current assets
Contract assets - 235 235
Trade and other receivables 3,753 (217) 3,536
Non-current liabilities
Contract liabilities - 221 221
Deferred tax liability 1,665 (30) 1,635
Current liabilities
Contract liabilities - 1,532 1,532
Trade and other payables 6,246 (1,391) 4,855
Net assets 26,669 (127) 26,542
Consolidated Statement of Changes in Equity
No reconciliation of the restated consolidated statement of
changes in equity has been presented as the only changes to this
primary statement are:
-- Recognition of restated retained earnings at 1 January 2017,
as presented in the restated Consolidated Statement of Financial
Position as at this date.
-- Recognition of the restated profit for the year ending 31
December 2017 as presented in the restated Consolidated Statement
of Profit and Loss and Other Comprehensive Income.
Consolidated Statement of Cash Flows
There has been a change in net cash from operating activities
and cash flow from financial activities, because of the financing
element associated with certain implementation fees.
In addition, there are certain re-classifications in the
components of cash flow movements:
-- Contract assets have been recognised at 1 January 2017 with
amortisation of these assets recorded in the Consolidated Statement
of Profit and Loss and Other Comprehensive Income for the year
ending 31 December 2017.
-- The movements in cash flows from operating activities
reflects the non-cash movement recorded in the Consolidated
Statement of Profit and Loss and Other Comprehensive Income
-- The Group has restated debtor and creditor balances in the
Statement of Financial Position. The movement in cash flows from
operating activities reflect the relevant cash and non-cash
movements in reclassified line items.
Explanation of significant areas for adjustment
The significant areas of adjustment are in respect of:
-- The spreading of revenue associated with technical
installation and consultancy, which is not a separate performance
obligation under IFRS 15 and is combined with other deliverables in
the contract. This revenue was previously recognised up front under
IAS 18. The recognition of this revenue over the life of the
contract has resulted in a decrease in revenue at the start of the
contract and a corresponding increase in deferred income.
-- The recognition of a financing component for contracts with a
material up-front fee for technical installation and
consultancy.
-- Recognition of contract fulfilment asset in respect of the
costs associated with the design and construction of the technology
platform. These costs are then amortised over the life of the
contract.
-- Reclassification of sales commission from, trade and other receivables to contract assets.
Initial application of IFRS 16
IFRS 16 Leases, is effective for periods beginning on or after 1
January 2019. IFRS 16 removes the operating and finance lease
classification in IAS 17 Leases and replaces them with the concept
of right-of-use assets and associated financial liabilities. This
change results in the recognition of a liability on the balance
sheet for all leases which convey a right to use the asset for the
period of the contract. The lease liability reflects the present
value of the future rental payments, discounted using either the
effective interest rate or the incremental borrowing rate of the
entity.
The group has early adopted IFRS 16 for the year ending 31
December 2018, applying the cumulative catch up transition
approach. The adoption of IFRS 16 has resulted in the recognition
of a lease liability and right-of-use asset of GBP1.1m, relating to
property leases, at 1 January 2018.
Initial application of IFRS 9
IFRS 9 is effective as at 1 January 2018 and has been adopted
from that date. The impact on reserves and increase in receivable
provision at adoption was GBP27,000.
3. Segmental analysis
A segment is a distinguishable component of the Group that is
engaged in providing products or services in a particular business
sector (business segment) or in providing products or services in a
particular economic environment (geographic segment), which is
subject to risks and rewards that are different in those other
segments.
The Group operated in the period in one segment, the provision
of hosted managed services, and in one market, the United Kingdom.
The disclosures required by IFRS8 relating to profits, losses,
assets and liabilities of the segment are therefore shown by the
financial statements as a whole.
4. Exceptional items
The following items are considered significant by virtue of
their size and nature and therefore have been recognised as
exceptional items during the period
6 mths to 30 Jun 18 6 mths to 30 Jun 17 12 mths to 31 Dec 17
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
"Nasstar 10-19"
organisational
re-structure 50 195 195
"Nasstar 10-19" data centre
consolidation & office
closure 98 80 137
Share repurchase costs - - 13
Provision for onerous lease - 136 87
148 411 432
============================ ============================ ============================
5. Income tax credit
The income tax credit for the period is based on the estimated
rate of corporation tax that is likely to be effective for the year
to 31 December 2018.
6. Dividends
A final dividend of 0.06p in respect of 2016 was paid on 9 July
2018 to shareholders on the register at the close of business on 8
June 2018.
7. Earnings per share
Loss per share:
Basic (0.1p)
Diluted (0.1p)
The calculation of the basic loss per share for the six months
ended 30 June 2018 is based upon the following.
6 mths 6 mths 12 mths
to 30 Jun to 30 to 31 Dec
18 Unaudited Jun 17 17 Unaudited
Unaudited
Weighted average no. of shares in issue 574,542,287 579,021,565 576,360,096
Loss attributable to shareholders of (GBP404,000) (GBP898,000) (GBP1,344,000)
the parent
Loss per 1p ordinary share (0.1p) (0.2p) (0.2p)
The diluted loss per share for all periods is the same as the
basic loss per share as the losses have an anti-dilutive
effect.
8. Availability of audited and interim accounts
Copies of the 2017 audited accounts are available on the
Company's website
(http://www.nasstar.com/investors/financial-reports) for the
purposes of AIM rule 26. Further copies of these interim results
will be available at the Company's registered office: Datapoint
House, 400 Queensway Business Park, Queensway, Telford, Shropshire,
TF1 7UL or on the Company website at www.nasstar.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 EADNLAFNPEFF
(END) Dow Jones Newswires
September 24, 2018 09:21 ET (13:21 GMT)
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