TIDMAFRN
RNS Number : 8400W
Aferian PLC
23 August 2022
23 August 2022
AFERIAN PLC
("Aferian", the "Company" or the "Group")
HALF YEAR RESULTS
Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions
company, announces its unaudited results for the six months ended
31 May 2022 ("H1 2022"), which demonstrate a performance in line
with the trading update announced on 14 June 2022.
Donald McGarva, Chief Executive Officer of Aferian plc said:
"Eighteen months into the execution of our 2025 strategy, I am
pleased to see the steady drumbeat of progress towards our goals
showing through in our performance. Our strategy of driving our
business towards higher quality, increasingly visible revenue
streams is galvanising our team, focusing our efforts and - most
importantly - delivering results. We step into the second half of
this year with an Annual Recurring Revenue some 14% higher than
this time last year. This is an achievement of which all our
colleagues should be proud.
"Now, nearly three months into Q3, we continue to have
confidence in our second half prospects. We are seeing improved
availability of components in the second half, unwinding delays
seen in H1. With the acquisition of The Filter now complete we have
an even more compelling offering for our customers. The increasing
quality of engagement we are able to have with current and
prospective customers underpins my view that Aferian is well
positioned to not only benefit from global growth in streaming, but
also shape the way this dynamic market evolves for years to
come."
Financial Key Figures
Periods ended 31 May
$m unless otherwise stated H1 2022 H1 2021 Change
--------------------------------------- ------- ------- ------
Revenue 44.5 45.3 (2%)
Exit run rate Annual Recurring Revenue
("ARR") (1) 15.8 13.8 14%
Statutory operating (loss)/profit (0.6) 1.9 (132%)
Statutory basic earnings per share
(US cents) (1.76) 1.16 -
---------------------------------------- ------- ------- ------
Adjusted operating profit (2) 2.4 5.1 (53%)
Adjusted basic earnings per share
(US cents) (3) 1.50 5.05 (70%)
---------------------------------------- ------- ------- ------
Net cash (4) 7.8 10.1 (23%)
----------------------------------------- ------- ------- ------
Interim dividend per share (GBP pence) 1.0 1.0 -%
----------------------------------------- ------- ------- ------
Notes
1. Exit Annual Recurring Revenue (ARR) is annual run-rate recurring revenue as at 31 May 2022.
2. Adjusted operating profit is a non-GAAP measure and excludes
amortisation of acquired intangibles, exceptional items, and
share-based payment charges.
3. Adjusted basic earnings per share is a non-GAAP measure and
excludes amortisation of acquired intangibles, exceptional items,
share-based payment charges and non-recurring finance income and
expense.
4. Net cash is cash and cash equivalents less loans and bank borrowings.
Financial Highlights
-- Further momentum demonstrated in improving the quality and visibility of Group earnings:
o Higher margin software & services revenue of $12.0m, up
21% in H1 2022 compared to H1 2021.
o Recurring revenue of $8.2m, up 49% in H1 2022 compared to H1
2021.
o Exit run rate ARR of $15.8m, up 14% in H1 2022 compared to H1
2021 (constant currency basis: 26%).
-- As previously announced in June 2022 device revenues were
negatively impacted in H1 by delays in product shipments because of
COVID-related supply chain issues , but we are confident that the
order book and improved availability of components will drive
higher revenues in H2.
-- Adjusted operating profit of $2.4m, down 53% in H1 2022
compared to H1 2021 due to delay of device revenues into H2.
-- Significant increase in adjusted cashflow from operating
activities before tax from $4.0m to $6.7m, an increase of 68%
-- A strong balance sheet, providing capacity for organic and
M&A-related investments, and a banking facility of up to $100m
in place and undrawn.
Strategic & Operational Highlights
-- Market dynamics continue to support Aferian's growth ambitions and strategic positioning.
-- Customer offering further enhanced by the acquisition and integration of The Filter:
o Brings new customers, new capabilities for existing customers
- and powered the launch of 24iQ: our new personalisation and
content recommendations service.
-- Continued to innovate in product modularity and capability:
o 24i : Relaunched our streaming platform under the name 24i Mod
Studio, alongside launching 24i OTT Studio and 24i Pay TV Studio:
two proprietary off-the-shelf solutions containing all the
technology capabilities required to launch a streaming service in a
matter of weeks for Tier 3 and Tier 4 customers.
o Amino : More than 116 customers have now deployed our SaaS
device software management platform, with the number of devices
managed growing by 48% year-on-year.
-- Supported customers with critical, innovative rollouts and deployments:
o 24i : Supported Waoo in Denmark and Telenor Sweden with their
rollouts of advanced new streaming services based on devices using
Google's popular Android TV operating system.
o Amino : PCCW publicly launched its new generation of Now TV
streaming services powered by Amino software, facilitating the
integration of Netflix and other third-party streaming content
alongside its own.
Current Trading and Outlook
Trading since the period-end has reinforced the Board's full
year confidence, as expressed in our 14 June 2022 Trading Update.
The Group remains in a strong position both financially and
operationally. With a solid H2 order book, availability of
components much improved since H1, delayed orders from H1 now
shipped and H2 production weighted to Q3 to mitigate any potential,
additional supply chain issues, the Board expects to deliver a much
improved second half performance. Therefore, subject to continuing
availability of components and shipment levels, the Board remains
confident in achieving results in line with its expectations for
the year ending 30 November 2022.
For further information please contact:
Aferian plc +44 (0)1223 598197
Donald McGarva, Chief Executive Officer
Mark Carlisle, Chief Financial Officer
+44 (0)20 7597
Investec plc (NOMAD and Broker) 5970
David Anderson / Patrick Robb / Nick Prowting
/ Cameron MacRitchie
+44 (0)20 3727
FTI Consulting LLP (Financial communications) 1000
Matt Dixon / Tom Blundell
About Aferian plc
Aferian plc (AIM: AFRN) is a B2B video streaming solutions
company. Our end-to-end solutions bring live and on-demand video to
every kind of screen. We create the forward-thinking solutions that
our customers need to drive subscriber engagement, audience
satisfaction, and revenue growth.
It is our belief that successful media companies and services
will be those that are most consumer-centric, data driven and
flexible to change. We focus on innovating technologies that enable
our customers stay ahead of evolving viewer demand by providing
smarter, more cost-effective ways of delivering end-to-end modern
TV and video experiences to consumers. By anticipating
technological and behavioural audience trends, our software
solutions empower our customers to heighten viewer enjoyment, drive
growth in audience share and ultimately, their profitability.
Aferian plc has two operating companies: 24i, which focusses on
streaming video experiences, and Amino, which connects Pay TV to
streaming services. Our two complementary companies combine their
products and services to create solutions which ensure that people
can consume TV and video how and when they want it. Our solutions
deliver modern TV and video experiences every day to millions of
viewers globally, via our growing global customer base of over 500
service providers.
Aferian plc is traded on the London Stock Exchange Alternative
Investment Market (AIM: symbol AFRN). Headquartered in Cambridge,
UK, the company has over 350 staff located in 11 offices, including
major European cities as Amsterdam, Helsinki, Copenhagen, and Brno,
as well as in San Francisco and Hong Kong. For more information,
please visit www.aferian.com .
Chief Executive Officer's review
2025 Strategy: moving with - and shaping - our markets
During the first half of this current financial year, we have
made further, meaningful progress towards our goals of delivering
improved quality of earnings from our operations and enhanced
visibility of the revenues we seek to generate.
Our work is helped by the fact that Aferian continues to operate
in the growing video streaming market. This is aligned with our
view that consumers expect to be able to watch the video content
they love, anywhere, anytime on any device. This market remains a
growing, dynamic and exciting space with Aferian well-placed to
help Pay TV operators, streaming services and content owners
capture value from these behavioural shifts.
As consumer viewing habits change, video streaming consumption
is currently growing by c.13% per annum*, which is further
evidenced in the UK by recent reports of record usage of the BBC
iPlayer streaming service**. At the same time, audiences watch
streaming video services across an ever-increasing range of
devices, enabled by the ongoing growth in global penetration of
high-speed broadband. As this happens, our customers, Pay TV
operators and streaming service providers, are continuing to invest
in and adapt their offerings to meet consumer demand, refreshing
and optimising their services in order to provide the features and
functionality that consumers desire. In a market dictated by
consumer choice, new video streaming services are also continually
launching with a long tail of niche content that enables them to
capture additional revenue share.
This is the backdrop against which Aferian operates. More
importantly, this is a market Aferian is helping to shape. Our
products & services, augmented by the continuing service
development and M&A enhancements we have invested in this year,
are allowing Pay TV operators, streaming services and content
owners to improve and re-align their own offerings and drive value
from the innovative new services our technologies make
possible.
Continued progress towards delivering improved quality of
earnings
Supported by these trends, the Group has continued to make
strong progress in the first half of 2022 toward improving the
quality and visibility of its earnings. This progress is
particularly encouraging, given it has been made against a backdrop
of challenging conditions in the global supply chain and currency
headwinds caused by the decrease of the value of the Euro against
the US Dollar.
Aferian reported an exit run rate ARR of $15.8m for H1 2022 (H1
2021: $13.8m) representing 14% growth or 26% on constant currency
basis (using exchange rates as at 31 May 2021). Higher margin
software and services revenues were $12.0m in H1 2022 (H1 2021:
$9.9m), representing a half-on-half increase of 21%, or 28% on a
constant currency basis.
As reported in our 14 June 2022 trading update, device revenues
in the first half were $32.5m: a decrease of 8% year-on-year. Our
ability to supply streaming devices to customers in the period was
impacted by supply chain challenges, including shipping and
production delays, caused principally by COVID-19 related
manufacturing shutdowns in China. However, to mitigate against
further potential delays, second half device production has been
weighted into Q3. The Board expects device revenues to be higher in
the second half of the year, supported by the order book.
Consequently, Group revenue for the first half stood at $44.5m
(H1 2021: $45.3m).
H1 2022 Key Performance Indicators
Our key performance indicators demonstrate continued strategic
progress during the first half, reporting growth in software &
services revenue (up 21%) and exit ARR (up 14%).
H1 2022 H1 2021
$m $m
-------------------------------------------------- --------- --------
Software & services revenues 12.0 9.9
Device revenues 32.5 35.4
Total revenue 44.5 45.3
ARR at 31 May ("Exit ARR") 15.8 13.8
Adjusted operating cashflow before tax 6.7 4.0
-------------------------------------------------- --------- --------
Net customer revenue retention rate on recurring
revenue** 113% 120%
-------------------------------------------------- --------- --------
*Source: Boston Consulting Group
**Source:
https://www.csimagazine.com/csi/BBC-iPlayer-streams-off-to-best-start-to-the-year.php
***on a constant currency basis
M&A
In April 2022, we acquired The Filter, a UK data science
specialist business, for an initial consideration of $1.5m and a
deferred consideration payable in October 2023 of $0.3m. Additional
consideration of $1.8m (capped at $3.2m), is expected to be paid
subject to Exit ARR targets being met over a two-year period. Amid
intense competition for viewers in the streaming market, our
customers are increasingly looking to make use of the data
collected by their video streaming applications to help them offer
consumers more highly personalised and engaging experiences. The
Filter's advanced machine learning algorithms and managed services
can be sold either as an integrated or standalone solution to new
or existing customers. This represents an excellent opportunity for
us to expand our customer base and is a clear example of how we are
actively shaping and driving the growth markets we operate in.
The acquisition of The Filter immediately added high quality
customers to the Group including BBC Studios-owned UK TV Play,
German streaming service Joyn, and EPIX, a North American Video on
Demand service owned by MGM/Amazon. It has also brought an
incredibly talented and engaged new team with it. The rapid
integration of The Filter's complementary technologies into 24i has
already enabled us to launch a new managed personalisation and
recommendations service called 24iQ in May.
Aferian's M&A strategy continues to include the acquisition
of emerging technologies that add value to our customers by solving
more of the key challenges they face in meeting consumer needs. In
addition, the Group seeks further acquisitions that will enable us
to scale up and to expand into new geographies and market
verticals.
People and culture
As the majority of our employees return to some degree of
normality with the opportunity for office working and face-to-face
meetings and events, ongoing COVID-19 restrictions have made it a
particularly difficult first half for our team in Hong Kong. Hybrid
working, of course, brings its own challenges, but its many
benefits are yet to be fully experienced by our Hong Kong
colleagues. We pay tribute to them for their resilience and
determination in dealing with continuing lockdowns and thank them
for their commitment to delivering on the Group's priorities,
despite the significant difficulties affecting their personal and
working lives. We also offer our ongoing support and gratitude to
our small but valued team of developers based in Ukraine who have
largely continued to work uninterrupted under the most
extraordinarily difficult circumstances since the start of the war
in February.
Operational review
24i
24i offers a robust technology platform that enables both media
and entertainment companies and Pay TV operators to stream their TV
and video programming to any type of screen and to build audience
engagement. 24i has a 13-year market-leading position and works
with customers like NPO, Telenor, Pure Flix and Broadway HD.
In the first half, 24i has seen a period of significant
investment in the future, with the acquisition of The Filter, the
rebranding of its core streaming platform and ongoing product
development to drive further growth.
24i continues to focus on building recurring revenues in line
the with Group's overall strategy. At the period end, 24i reported
a half-on-half increase of 13% in exit ARR (constant currency:
26%). This growth predominately came from existing customers with a
net retention rate ("NRR") of 117% (H1 2021: 128%) on a constant
currency basis.
In December 2021, we relaunched our streaming platform under the
new name 24i Mod Studio. The new identity is designed to reflect
the modularity and flexibility of the 24i offering.
Alongside the name change, we launched pre-packaged, productised
solutions for two of our key target markets - content owners and
Pay TV operators. 24i OTT Studio and 24i Pay TV Studio are
off-the-shelf solutions containing all the technology that a
customer in these markets would need to launch a streaming service
in a matter of weeks.
During the period we supported two existing Pay TV customers,
Waoo in Denmark and Telenor Sweden, to rollout new consumer
services that include attractive third-party streaming services
alongside their own Pay TV offering on a single, managed device.
This helps the operators to cement their role at the centre of
household viewing and is an emerging trend in the Pay TV
market.
We also completed a significant project to fully implement
geo-redundancy for our customer, Delta, in the Netherlands,
enabling them to offer a more robust and resilient service to their
growing subscriber base. In addition, our team implemented KPN's
video streaming service in the Netherlands on Amazon Fire TV
devices, adding to our previous work to make the KPN service
available on Smart TVs from Samsung and LG, as well as those TVs
that use the Android TV operating system.
Our teams are now working hard to finalise development of our
fully managed and hosted "TV as a Service" offering which is due to
launch to the market in September 2022. This cloud-based solution
will enable Pay TV operators to go to market more quickly with a
fully featured TV offering. 24i has integrated its solutions with
market-leading partners into a fully hosted and managed end-to-end
solution, enabling operators to enjoy a single point of contact for
all elements of their best-of-breed TV streaming
infrastructure.
Amino
Amino provides streaming devices powered by its own software
that are integrated into a Pay TV operator's technology ecosystem
to enable them to offer the advanced streaming services demanded by
today's consumers. The same devices and software also enable
advertisers and businesses to display their content on the growing
population of different digital video displays in use in our public
spaces. Amino has a 25-year heritage in streaming video with
customers like PCCW, Cincinnati Bell, T-Mobile Netherlands and
Entel.
During the period Amino revenues fell by 7% to $35.2m, because
of production delays caused by COVID-19 related lockdowns in China
which impacted the availability of components, device production
and the onward supply chain. This resulted in approximately 10%
fewer devices being shipped in H1 2022 compared to H1 2021.
However, to mitigate any further impact of delays, we have weighted
second half production of devices into Q3. Therefore, the Group
expects device revenues to be higher in the second half of the
year, supported by the order book. Amino continues to maintain its
strong margins and cash generation, despite increased costs of raw
materials.
The launch of the Now TV video streaming service by our customer
PCCW in Hong Kong was an excellent example of how Amino's software
makes it easy for Pay TV operators to add third party streaming
offerings, such as Netflix, alongside their own content to remain
competitive. Engage, our leading SaaS device software management,
customer support and analytics solution, continued to grow
strongly. More than 116 customers have now deployed Engage, an
increase of 29% from the end of H1 2021. At the same time the
number of active devices managed by the solution has grown by 48%
year-on-year. This solution remains a significant differentiator
for us in a competitive landscape. We also continue to invest in
high levels of customer service and our Net Promotor Score averaged
88 during the period (FY 2021: 86).
As a result of R&D investment over the past 12 months,
during the Period, we launched our new range of streaming devices,
which utilise the Reference Design Kit (RDK) software stack. RDK is
one of the fastest-growing Pay TV platforms in the world and is
already used in millions of devices globally to power their
next-generation of video and broadband services. The rise of RDK
gives Pay TV operators a viable alternative to traditional Linux
devices or the popular Android TV platform as a route to combining
their content with third party streaming services. Shortly after
the period end, Amino was accepted as an RDK "Preferred Plus"
member, which evidences our commitment to helping to enhance the
RDK stack through collaboration and contributions which speed up
innovation and customer time to market.
In addition to the Pay TV market, Amino's streaming devices have
long been used by a variety of enterprises to stream video over
private networks such as in hospitals and hotels. Our marketing
efforts aim to capitalise further on the fast-growing Digital
Signage market which is worth an estimated $1.6bn globally
according to research conducted by Mordor Intelligence in November
2021.
Environmental, Social and Governance ("ESG")
Today we have published an update to our ESG report. This can be
found on our website at https://aferian.com/esg . Our approach to
ESG uses the Japanese concept of Ikigai meaning "a reason for
being" and which refers to having a meaningful direction or purpose
in life. The ESG report provides an overview of our ongoing
progress against our chosen six of the United Nations Sustainable
Development Goals as well as the Sustainable Accounting Standards
Board's ("SASB") Software and IT Services and Hardware
sustainability accounting standards.
Board changes
There have been a number of changes to the Board composition
since the publication of the Annual Report.
We are delighted to welcome Bruce Powell who joined the Group on
3 August 2022 as a Non-Executive Director and Chair of the Aferian
Audit committee. Bruce brings more than 30 years of extensive
board-level experience to the Group. He is currently Chairman of
packaging companies Threadless Closures Ltd and Crateight Ltd, and
of Holyport College. His previous roles include 18 years on the
board of Kofax plc and serving as CFO for Imagination Technologies
plc.
On 3 August 2022, Steve Oetegenn was appointed as an Executive
Director of the Group as President of the Americas. Steve has been
supporting the Aferian executive management team in a consultancy
capacity since joining the Board as a Non-executive Director in
January 2021. He has now taken on a leadership role to support the
growth of Aferian in this key region. As a result, Steve has
stepped down from his role as Non-Executive Director.
Joachim Bergman stepped down from his role of CEO of 24i in
March 2022 and from the Board of Directors in April 2022. Joachim
joined Aferian in September 2017 as SVP Cloud Services and we would
like to thank him for the successful integration and growth
achieved by 24i since its acquisition by Aferian in May 2019. As
planned, the leadership of 24i successfully transitioned to Dr
Neale Foster who joined 24i as their CEO in March 2022.
Erika Schraner stepped down as a Non-Executive Director and from
her role as Chair of the Aferian Audit Committee on 29th July 2022.
Since joining the Board in 2019, Erika has made a strong
contribution to the Group, and we wish her well in the next phase
of her career.
Following these changes, the Board comprises three Non-Executive
Directors and three Executive Directors. The Group remains focussed
on improving the diversity of its Board and carefully considers a
broad range of candidates ahead of any appointment.
Current trading and outlook
Trading since the period-end has reinforced the Board's full
year confidence, as expressed in our 14 June 2022 Trading Update.
The Group remains in a strong position both financially and
operationally. With a solid H2 order book, availability of
components much improved since H1, delayed orders from H1 now
shipped and H2 production weighted to Q3 to mitigate any potential,
additional supply chain issues, the Board expects to deliver a much
improved second half performance. Therefore, subject to continuing
availability of components and shipment levels, the Board remains
confident in achieving results in line with its expectations for
the year ending 30 November 2022.
Donald McGarva
Chief Executive Officer
22 August 2022
Chief Financial Officer's review
As indicated in the trading update of 14 June 2022, the interim
results show excellent progress in the 24i business. However, first
half revenue of the Amino business has been impacted in the short
term by delays in deliveries to customers because of COVID-related
supply chain issues. Overall, the Group's financial results for the
period ended 31 May 2022 demonstrate progress against the Group's
financial objectives: to deliver improved quality of earnings and
enhanced visibility of revenue.
High margin software & services revenues increased by 21% to
$12.0m (H1 2021: $9.9m). Excluding the impact of the Nordija
acquisition, software & services revenues increased organically
by 7% (constant currency basis: 13%). The visibility of the Group's
revenues increased due to higher software & services revenue
and exit run rate ARR increasing to $15.8m (H1 2021: $13.8m),
representing growth of 14% (constant currency basis: 26%).
Total Group revenues decreased by 2% to $44.5m (H1 2022:
$45.3m). Excluding the impact of the Nordija acquisition in May
2021, revenue decreased by 5%. The decrease is due to lower device
revenues in the Amino business as set out in the Chief Executive
Officer's review above.
The Group's gross profit margin has been negatively impacted by
the increased price of components. Most, but not all, of these
increases have been reflected in price increases to customers. In
addition, the Group has experienced increased headcount-related
costs to retain and attract a skilled workforce given the current
economic conditions with regards to labour costs. Notwithstanding
the pressure on margins from these economic forces, the Group
expects operating profit margins to be broadly in line with the
previous year.
The Group continued to generate strong operating cash flows.
Adjusted operating cashflow before tax and exceptional costs was
$6.7m (H1 2021: $4.0m) representing an adjusted EBITDA cash
conversion of 116% (H1 2021: 48%). The business continues to have
negative working capital of $7.4m (H1 2021: $3.3m) and working
capital movements can be materially impacted by the timing of cash
flows arising from different payment terms given to larger
customers. In addition, the Group is continuing to invest in
inventory to increase the availability of components and mitigate
against potential, additional supply chain delays. Operating cash
flow before tax was $6.2m (H1 2021: $1.8m).
The Group had net cash of $7.8m as at 31 May 2022 (30 November
2021: $14.2m). Cash outflows during the period include the
acquisition of The Filter, payment of the ordinary dividend and
payment of bank facility fees. At the start of the period, the
Group secured a new banking facility with Barclays Bank plc,
Silicon Valley Bank, and Bank of Ireland. This increased facility
of $50m, split evenly across the three-bank club, also includes a
further $50m available by way of an accordion. The new facility has
a three-year term to 23 December 2024 with options to extend by a
further one or two years. The new facility remained undrawn as at
31 May 2022.
Revenue
H1 2022 H1 2021
$m $m Change
------------------------------ -------------- -------------- --------------
Software and services
Revenue
Recurring 8.2 5.5 49%
Non-recurring 3.8 4.4 (14%)
Total revenue 12.0 9.9 21%
Devices including integrated
software
Revenue
Non-recurring 32.5 35.4 (8%)
Total revenue 32.5 35.4 (8%)
Total
Revenue
Recurring 8.2 5.5 49%
Non-recurring 36.3 39.8 (9%)
Total revenue 44.5 45.3 (2%)
------------------------------ -------------- -------------- --------------
High margin software & services represent 27% of total
revenues for the period (H1 2021: 22%), of which 68% was recurring
(H1 2021: 56%).
Revenue and adjusted EBITDA
Revenue Adjusted EBITDA
H1 2022 H1 2021 H1 2022 H1 2021
$m $m $m $m
-------------- ---------- --------- --- ---------- ---------
24i 9.3 7.5 0.6 0.2
Amino 35.2 37.8 6.5 9.3
Central costs - - (1.3) (1.2)
-------------- ---------- --------- --- ---------- ---------
Total 44.5 45.3 5.8 8.3
-------------- ---------- --------- --- ---------- ---------
Adjusted EBITDA for the six months to 31 May 2022 was $5.8m (H1
2021: $8.3m). Adjusted EBITDA is reconciled below and is calculated
as operating profit before depreciation, interest, tax,
amortisation, exceptional items and employee share-based payment
charges. In line with expected higher revenues in the second half
of the year we expect EBITDA margin for the full year to be broadly
in line with the prior year. This is consistent with the way the
financial performance of the Group is presented to the Board and
Chief Operating Decision Maker.
The Directors believe that this provides a more meaningful
comparison of how the business is managed and measured on a
day-to-day basis.
24i segment
H1 2022 H1 2021
$m $m
--------------------------------
Software & services 9.3 7.5
Revenue 9.3 7.5
Adjusted cost of sales (2.6) (1.9)
-------------------------------- --------- --------
Adjusted gross profit margin 6.7 5.6
Adjusted gross profit margin % 72% 75%
Adjusted operating costs (6.1) (5.4)
-------------------------------- --------- --------
Adjusted EBITDA* 0.6 0.2
Adjusted EBITDA margin % 6% 3%
Capitalised development costs 3.2 2.6
-------------------------------- --------- --------
*Adjusted EBITDA is a non-GAAP measure and excludes
depreciation, amortisation, interest, tax, exceptional items and
share based payment charges.
With the increased focus on improving visibility, ARR has grown
from $10.0m to $11.3m in the last 12 months. This represents
year-on-year growth of 13% (constant currency basis: 26%). The
revenue increase in the period represents the inclusion of the
results of Nordija A/S, acquired in May 2021. On an organic basis,
revenue has increased by 5% (constant currency basis: 13%).
Amino segment
H1 2022 H1 2021
$m $m
---------------------------------------
Software & services 2.7 2.4
Devices including integrated software 32.5 35.4
Revenue 35.2 37.8
Adjusted cost of sales (22.5) (22.8)
--------------------------------------- ------------ -----------
Adjusted gross profit 12.7 15.0
Adjusted gross profit margin % 36% 40%
Adjusted operating costs (6.2) (5.7)
--------------------------------------- ------------ -----------
Adjusted EBITDA* 6.5 9.3
Adjusted EBITDA margin % 18% 25%
Capitalised development costs 1.0 0.9
--------------------------------------- ------------ -----------
*Adjusted EBITDA is a non-GAAP measure and excludes
depreciation, amortisation, interest, tax, exceptional items and
share based payment charges.
Device revenues decreased by 8% to $32.5m (H1 2021: $35.4m)
caused by a reduction in the volumes of devices shipped in the
period, which decreased by c10% year on year. A large proportion of
component price increases, but not all, have been reflected in
prices charged to customers. Gross profit margin has therefore
reduced in the period compared to the prior year.
The Group retains a core customer base in respect of device
revenues, whereby repeat orders are placed by the same customer
over multiple financial periods. Taking the last three financial
periods, repeat orders from existing customers over that period has
accounted for 91% (H1 2021: 92%) of total device revenue. It is
this loyal customer base, and continued product reliability, that
will help to ensure full year expectations on device revenue are
met.
Central costs
H1 2022 H1 2021
$m $m
Adjusted operating costs and adjusted EBITDA (1.3) (1.2)
---------------------------------------------- --------- --------
Central costs comprise the costs of the Board, including
executive directors, as well as costs associated with the Company's
listing on the London Stock Exchange.
Adjusted EBITDA
H1 2022 H1 2021
$m $m
--------------------------------------------
Revenue 44.5 45.3
Adjusted cost of sales (25.1) (24.7)
-------------------------------------------- ------------ -----------
Adjusted gross profit 19.4 20.6
Adjusted gross profit margin % 44% 45%
Customer support and professional services (2.9) (2.9)
Research and development expenses (2.9) (2.9)
SG&A (7.8) (6.5)
Total adjusted operating expenses (13.6) (12.3)
Adjusted EBITDA 5.8 8.3
-------------------------------------------- ------------ -----------
Research & development costs
The Group continues to invest in research and in the development
of new products and spent $7.1m on R&D activities (H1 2021:
$6.4m), of which $4.2m (H1 2021: $3.5m) was capitalised.
H1 2022 H1 2021
% of
$m % of revenue $m revenue
-------------------------------- --------- -------------- -------- ---------
Core engineering expenses 6.4 14% 5.7 13%
Product management 0.3 1% 0.3 1%
R&D senior management 0.4 1% 0.4 1%
-------------------------------- --------- -------------- -------- ---------
Total research and development
costs 7.1 16% 6.4 15%
-------------------------------- --------- -------------- -------- ---------
Less Capitalised development
costs (4.2) - (3.5) -
-------------------------------- --------- -------------- -------- ---------
Net research and development
expense 2.9 - 2.9 -
-------------------------------- --------- -------------- -------- ---------
Selling, general and administrative (SG&A) expenses have
increased by $1.3m in the period to $7.8m (H1 2021: $6.5m). This
increase is due to the acquisition of Nordija and increased
headcount-related costs to retain and attract a skilled workforce
given the current economic conditions with regards to labour
costs.
A reconciliation of Adjusted EBITDA to operating (loss)/profit
is provided as follows:
H1 2022 H1 2021
$m $m
------------------------------------------- --------- --------
Adjusted EBITDA 5.8 8.3
Exceptional items:
-- within operating expenses (0.5) (1.4)
Employee share-based payment charge (0.3) (0.4)
Depreciation and amortisation (5.6) (4.6)
------------------------------------------- --------- --------
Operating (loss)/profit (0.6) 1.9
------------------------------------------- --------- --------
Exceptional items
Exceptional items for the period comprised:
-- $0.3m (H1 2021: $0.3m) 24i post-acquisition integration and associated restructuring costs;
-- $0.2m (H1 2021: $0.8m) one-off costs in respect of
acquisitions and legal costs, which includes costs associated with
The Filter and Nordija acquisitions. The prior period included
one-off costs in respect of acquisitions and legal costs, which
includes costs associated with aborted acquisitions.
-- $nil (H1 2021: $0.3m) contingent post-acquisition
remuneration in respect of the acquisition of 24i Unit Media
BV.
Depreciation and amortisation
Excluding amortisation of intangibles recognised on acquisition,
depreciation and amortisation was $3.3m (H1 2021: $3.2m).
Amortisation of intangibles recognised on acquisitions was $2.2m
(H1 2021: $1.4m). The increase of $0.8m in the period relates to
the acquisition of Nordija A/S in May 2021 and The Filter in April
2022.
Taxation
The tax charge of $0.7m (H1 2021: $0.8m) comprises:
-- $0.7m (H1 2021: $1.1m) current tax charge; and
-- $nil (H1 2021: $0.3m) credit relating to the unwinding of
deferred tax assets and liabilities recognised on acquisitions.
(Loss)/profit after tax was $1.5m (H1 2021: $0.7m profit).
Cash flow
A reconciliation of adjusted operating cash flow before tax to
cash generated from operations before tax is provided as
follows:
H1 2022 H1 2021
$m $m
--------------------------------------------- --------- --------
Adjusted operating cashflow before tax 6.7 4.0
Post-acquisition integration and associated
restructuring costs (0.3) (0.3)
Acquisition and one-off legal costs (0.2) (0.1)
Aborted acquisition deposit - (1.8)
--------------------------------------------- --------- --------
Cash generated from operations before tax 6.2 1.8
--------------------------------------------- --------- --------
Adjusted cash flow from operations before tax was $6.7m (H1
2021: $4.0m), an increase of 68% due to a cash inflow of working
capital of $0.1m (H1 2021: outflow of $3.6m).
Cash generated from operations before tax was $6.2m (H1 2021:
$1.8m). The increase in the period of $4.4m can be attributable to
the management of working capital, as noted above, as well as an
outgoing of $1.8m in the prior year in relation to a deposit
advanced for an aborted acquisition, that was subsequently repaid
in H2 2021.
Tax payments, principally in respect of UK corporation tax,
totalled $1.9m during the period (H1 2021: $2.8m). The prior period
included a final payment of the previous tax year for the main UK
trading subsidiary as that subsidiary transitioned to advanced tax
payments.
During the period, the Group spent $0.1m (H1 2021: $0.1m) on
capital expenditure in respect of tangible fixed assets and
capitalised $4.2m of research and development costs (H1 2021:
$3.5m). The increase of $0.7m is due to the acquisition of Nordija
A/S.
Interest paid in the period of $1.5m (H1 2021: $0.6m) includes
fees paid associated with the new bank facility. Deferred
consideration payments totalling $0.5m (H1 2021: $nil) were made in
the period in relation to the acquisition of Nordija A/S in line
with the performance criteria which was satisfied.
The acquisition of The Filter included initial cash
consideration of $1.5m.
A final dividend in respect of the year ended 30 November 2021
of $2.3m (H1 2021: $2.0m) was paid during the period.
Financial position
The Group had cash of $7.8m (30 November 2021: $14.2m). At 31
May 2022, the Group had $50.0m (30 November 2021: $15.0m) undrawn
on its committed loan facility, which expires in December 2024. In
addition, the loan facility includes a further $50m by way of an
accordion.
At 31 May 2022, the Group had total equity of $96.3m (30
November 2021: $104.0m) and net current assets of $0.9m (30
November 2021: $9.2m). 63% of trade receivables were insured (30
November 2021: 51%) and debtor days were 24 days (30 November 2021:
23 days).
It remains the Group's policy to obtain insurance and where this
is not possible, due to the territory or customer involved, payment
in advance is required to a level that limits exposure to the
margin on the sale of devices.
Dividend
The Company's dividend policy is to deliver returns to
shareholders via growth and income and reflecting the Company's
growth ambitions. The policy of paying between 33-50% of adjusted
EPS in dividend is expected to provide shareholders with a growing
income stream whilst allowing the Company to invest in growth.
The Board intends to pay an interim dividend of 1.0 GBP pence
per share (H1 2021: 1.0 GBP pence). This interim dividend will be
payable on 15 September 2022, to shareholders on the register on 26
August 2022, with a corresponding ex-dividend date of 25 August
2022.
Going concern
In carrying out the going concern assessment, the Directors have
considered a number of scenarios, taking account of the possible
impacts of the pandemic, in relation to revenue forecasts for the
next 12 months. The current global economic conditions continue to
create uncertainty, and specific to the Group, recognising the
strength and flexibility of the Group's software-led strategy,
there are potential risks that the Group will be impacted by
decisions further up our supply chain. This could lead to delays in
contract negotiations and deferring or cancelling of anticipated
sales, and that sales and settlement of existing debts are impacted
too.
In reaching their going concern assessment, the Directors have
considered the foreseeable future, a period extending at least 12
months from the date of approval of this interim financial report.
This assessment has included consideration of the forecast
performance of the business, as noted above, the payment of
proposed dividends and deferred contingent consideration, and the
cash and financing facilities available to the Group. In light of
all of this analysis, the Directors are satisfied that, even if
this downside scenario were to occur, the Group has sufficient cash
resources over the period of at least 12 months from the date of
approval of the interim consolidated financial statements. As such,
the interim consolidated financial statements have been prepared on
a going concern basis.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group remain
consistent with the principal risks and uncertainties reported in
Aferian's 2021 Annual Report. Despite the supply chain challenges
seen in H1, the continued impact of COVID-19 on the Group continues
to be less marked than for other organisations. However, the
business continues to place appropriate focus and real time
management on the working practices, health and wellbeing of our
global workforce and the risk of delays to the global supply chain
for components used in Amino branded devices.
The Group is exposed to multiple economies around the world. The
Directors regularly assess the risks associated with the current
changing economic climate and its likely impact on the Group's
operations. Despite these risks, the business continues to operate
in a growing global market and remains well set for the year
ahead.
Mark Carlisle
Chief Financial Officer
22 August 2022
Consolidated income statement
For the six months ended 31 May 2022
Six months
ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
Notes $000s $000s
------------------------------------ ----- ------------- ------------------
Revenue 3 44,517 45,286
Cost of sales (25,106) (24, 667)
------------------------------------ ----- ------------- ------------------
Gross profit 19,411 20,619
Operating expenses (20,010) (18,763)
Operating (loss)/profit (599) 1,856
Adjusted operating profit 2,378 5, 088
Share based payment charge (310) ( 394)
Exceptional items 5 (516) (1, 414)
Amortisation of acquired intangible
assets (2,151) ( 1,424)
------------------------------------ ----- ------------- ------------------
Operating (loss)/profit (599) 1,856
------------------
Finance expense (223) ( 561)
Finance income 11 179
------------------------------------ ----- ------------- ------------------
Net finance expense (212) (382)
------------------------------------ ----- ------------- ------------------
(Loss)/profit before tax (811) 1,474
Tax charge (659) (803)
------------------------------------ ----- ------------- ------------------
(Loss)/profit after tax (1,470) 671
------------------------------------ ----- ------------- ------------------
(Loss)/profit for the period from
continuing operations attributable
to equity holders (1,470) 888
Non-controlling interest - (217)
------------------------------------ ----- ------------- ------------------
(Loss)/profit for the period (1,470) 671
------------------------------------ ----- ------------- ------------------
Basic earnings per 1p ordinary
share 6 (1.76c) 1.16c
Diluted earnings per 1p ordinary
share 6 (1.78c) 1.14c
------------------------------------ ----- ------------- ------------------
Consolidated statement of comprehensive income
For the six months ended 31 May 2022
Six months
ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
--------------------------------------- ------------ ----------------
(Loss)/profit for the period (1,470) 671
--------------------------------------- ------------ ----------------
Foreign exchange difference arising on
consolidation (4,232) 828
--------------------------------------- ------------ ----------------
Other comprehensive (loss)/income (4,232) 828
--------------------------------------- ------------ ----------------
Total comprehensive (loss)/income for
the period (5,702) 1,499
--------------------------------------- ------------ ----------------
Consolidated balance sheet
As at 31 May 2022
As at
31 May As at
2022 30 November
Notes Unaudited 2021*
Assets $000s $000s
----------------------------------- ----- ---------- ------------
Non-current assets
Property, plant and equipment 580 630
Right of use assets 1,655 1,910
Intangible assets 8 97,190 95,864
Other receivables 231 235
----------------------------------- ----- ---------- ------------
99,656 98,639
----------------------------------- ----- ---------- ------------
Current assets
Inventories 3,986 2,557
Trade and other receivables 18,318 21,936
Corporation tax receivable 378 113
Cash and cash equivalents 7,762 14,182
----------------------------------- ----- ---------- ------------
30,444 38,788
----------------------------------- ----- ---------- ------------
Total assets 130,100 137,427
----------------------------------- ----- ---------- ------------
Capital and reserves attributable
to equity holders of the business
Called-up share capital 1,484 1,484
Share premium 39,249 39,249
Capital redemption reserve 12 12
Foreign exchange reserves (7,620) (3,388)
Merger reserve 42,750 42,750
Retained earnings 20,376 23,857
----------------------------------- ----- ---------- ------------
Total equity 96,251 103,964
----------------------------------- ----- ---------- ------------
Liabilities
Current liabilities
Trade and other payables 29,249 27,812
Lease liabilities 315 966
Corporation tax payable - 774
29,564 29,552
----------------------------------- ----- ---------- ------------
Consolidated balance sheet (continued)
As at 31 May 2022
As at As at
31 May 2022 30 November
Unaudited 2021*
$000s $000s
----------------------------- ------------ ------------
Non-current liabilities
----------------------------- ------------ ------------
Trade and other payables 432 677
Lease liabilities 1,414 1,002
Provisions 1,158 1,163
Deferred tax liability 1,281 1,059
----------------------------- ------------ ------------
4,285 3,911
----------------------------- ------------ ------------
Total liabilities 33,849 33,463
----------------------------- ------------ ------------
Total equity and liabilities 130,100 137,427
----------------------------- ------------ ------------
* See Note 9, regarding finalisation of FY21 acquisition fair
value in accordance with IFRS 3
Consolidated Cash Flow Statement
For the six months ended 31 May 2022
Six months Six months
ended 31 May ended 31 May
2022 2021
Unaudited Unaudited
Notes $000s $000s
-------------------------------------------- ----- ------------- -------------
Cash flows from operating activities
Cash generated from operations 7 6,229 1,816
Net corporation tax paid (1,864) (2, 823)
-------------------------------------------- ----- ------------- -------------
Net cash generated from/(used in) operating
activities 4,365 (1,007)
-------------------------------------------- ----- ------------- -------------
Cash flows from investing activities
Expenditure on intangible assets (4,156) ( 3,504)
Payment of deferred consideration on
acquisition (503) -
Purchase of property, plant and equipment (124) ( 136)
Acquisition of subsidiary, net of cash
acquired 9 (1,545) (4,901)
-------------------------------------------- ----- ------------- -------------
Net cash used in investing activities (6,328) ( 8,541)
-------------------------------------------- ----- ------------- -------------
Cash flows from financing activities
Proceeds from exercise of employee share
options - 128
Proceeds from issue of new shares (net
of expenses) - 12,723
Interest paid (1,531) (51)
Lease liability repayments (629) (640)
Proceeds from borrowings - 6,887
Dividends paid (2,297) (1,969)
-------------------------------------------- ----- ------------- -------------
Net cash (used in)/generated from financing
activities (4,457) 17, 078
-------------------------------------------- ----- ------------- -------------
Net (decrease)/increase in cash and
cash equivalents (6,420) 7 ,530
Cash and cash equivalents at start of
the period 14,182 9,476
Effects of exchange rate fluctuations
on cash held - 20
-------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end of
period 7,762 17,026
-------------------------------------------- ----- ------------- -------------
Notes to the interim condensed consolidated financial
information
Six months ended 31 May 2022
1 General information
Aferian plc ('the Company') and its subsidiaries (together 'the
Group') specialise in the delivery of next generation video
experiences over IP using its end-to-end solution. This comprises
the 24i online video solution and Amino video streaming devices and
associated operating and device management software.
The Company is a public limited company which is listed on the
AIM market of the London Stock Exchange and is incorporated and
domiciled in England and Wales.
2 Basis of preparation
These interim consolidated financial statements have been
prepared using accounting policies based on United Kingdom adopted
international accounting standards ('IFRS') . They do not include
all disclosures that would otherwise be required in a complete set
of financial statements and should be read in conjunction with the
30 November 2021 Annual Report. The financial information for the
six months ended 31 May 2022 and 31 May 2021 does not constitute
statutory accounts within the meaning of Section 434 (3) of the
Companies Act 2006 and both periods are unaudited.
The annual financial statements of Aferian Plc ('the Group')
were prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006
('IFRS'). The statutory Annual Report and Financial Statements for
2021 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial
Statements for the year ended 30 November 2021 was unmodified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under 498(2) - (3) of the Companies Act
2006.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2021 annual financial statements.
Going Concern
The interim consolidated financial statements have been prepared
on a going concern basis. The ability of the Group to continue as a
going concern is contingent of the ongoing working capital
facilities and wider viability of the Group. The Group meets its
day-to-day working capital requirements through its cash balances,
working capital facilities and wider working capital
management.
The COVID-19 pandemic continues to impact the Group's supply
chain operations, as well as employees throughout the Group having
to continue to work remotely from home. From the outset, the Group
implemented efficient and appropriate measures to limit the impact
of COVID-19 on the results of the business and its future
operations, and the Directors believe that the business continues
to be able to navigate through the impact of COVID-19 due to the
strength of its customer proposition, its balance sheet, its cash
position and its available working capital. Where required, those
measures are still in place today as the Group follows the relevant
guidance set by authorities in the locations in which we
operate.
The Group had cash resources of $7.8m as at 31 May 2022 (30
November 2021: $14.2m) and net current assets of $0.9m as at 31 May
2022 (30 November 2021: $9.2m).
The current global economic conditions continue to create
uncertainty, and specific to the Group, recognising the strength
and flexibility of the Group's software-led strategy, there are
potential risks that the Group will be impacted by decisions
further up its supply chain. This could lead to delays in contract
negotiations and deferring or cancelling of anticipated sales, and
those sales and settlement of existing debts are impacted too. The
Group has a solid pipeline of repeat orders from existing customers
and, together with the growth in exit run rate ARR at 31 May 2022,
this provides enhanced visibility to future revenue forecasts and
cash flows. In respect of this going concern assessment, the
Directors have considered a number of scenarios, taking account of
possible further impact from the pandemic on the business, as noted
above. However, even in the material downside scenario, the
Directors are satisfied that the Group has sufficient cash
resources over the period and will be able to operate within its
existing working capital facilities and meet its liabilities as
they fall due. On that basis, the Directors therefore continue to
adopt the going concern basis when preparing the
The Board of Directors approved this interim report on 22 August
2022.
3 Revenue
The geographical analysis of revenue from external customers
generated by the identified operating segment is:
Six months Six months
ended ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
------------------ ------------ ------------
North America 16,019 16,845
Latin America 6,027 7,077
------------------ ------------ ------------
Netherlands 13,540 15,589
Rest of EMEA 7,829 4, 751
------------------ ------------ ------------
EMEA 21,369 20,340
Rest of the World 1,102 1, 024
------------------ ------------ ------------
44,517 45,286
------------------ ------------ ------------
The Group's revenue disaggregated by product is as follows:
Six months Six months
ended ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
------------------------------------------ ------------ ------------
Devices incorporating integrated software
and associated accessories 32,457 35,382
Software and services 12,060 9,904
------------------------------------------ ------------ ------------
44,517 45,286
------------------------------------------ ------------ ------------
4 Segmental analysis
Operating segments are reported in a manner consistent with the
internal reporting provided to the Aferian plc Chief Operating
Decision Maker ("CODM") for the use in strategic decision making
and monitoring of performance. The CODM has been identified as the
Group Chief Executive and the Chief Financial Officer. The CODM
reviews the Group's internal reporting in order to assess
performance and allocate resources. Performance of the operating
segments is based on adjusted EBITDA. Information provided to the
CODM is measured in a manner consistent with that in the Financial
Statements.
The Group reports three operating segments to the CODM:
-- the development and sale of streaming devices and solutions,
including licensing and support services ("Amino");
-- development and sale of an end-to-end streaming platform and
associated services. This includes the results of The Filter and
Nordija A/S, acquisitions during the current and prior period
respectively ("24i"); and
-- central costs which comprise the costs of the Board,
including the executive directors as well as costs associated with
the Company's listing on the London Stock Exchange.
Revenues and costs by segment are shown below.
Central
Amino 24i costs Total
2022 $000s $000s $000s $000s
Software and
Revenue services 2,723 9,311 - 12,034
Devices * 32,483 - - 32,483
-------------------- ------------------- --------- -------- -------- ---------
Total 35,206 9,311 - 44,517
% Recurring 7% 62% - 19%
Adjusted cost
of sales (22,484) (2,622) - (25,106)
-------------------- ------------------- --------- -------- -------- ---------
Adjusted gross
profit 12,722 6,689 - 19,411
Adjusted operating expenses (6,237) (6,046) (1,346) (13,629)
----------------------------------------- --------- -------- -------- ---------
Adjusted EBITDA 6,485 643 (1,346) 5,782
Exceptional items Operating expenses (516)
Share based payment charge (310)
Depreciation, amortisation,
and loss on disposal of fixed
assets (5,555)
----------------------------------------- --------- -------- -------- ---------
Operating loss (599)
Net finance expense (212)
-------------------- ------------------- --------- -------- -------- ---------
Loss before
tax (811)
-------------------- ------------------- --------- -------- -------- ---------
Additions to non-current assets:
Capitalised development costs 998 3,158 - 4,156
----------------------------------------- --------- -------- -------- ---------
* incorporating integrated Amino software and associated
accessories.
Central
Amino 24i costs Total
2021 $000s $000s $000s $000s
Software and
Revenue services 2,433 7,471 - 9,904
Devices * 35,382 - - 35,382
----------------- ------------------- --------- -------- -------- ---------
Total 37,815 7,471 - 45,286
% Recurring 5% 47% - 12%
Adjusted cost
of sales (22,781) (1,886) - (24,667)
----------------- ------------------- --------- -------- -------- ---------
Adjusted gross
profit 15,034 5,585 - 20,619
Adjusted operating expenses (5,745) (5,336) (1,225) (12,306)
-------------------------------------- --------- -------- -------- ---------
Adjusted EBITDA 9,289 249 (1,225) 8,313
Exceptional
items Operating expenses (1,414)
Share based payment charge (394)
Depreciation, amortisation,
and loss on disposal of fixed
assets (4,649)
-------------------------------------- --------- -------- -------- ---------
Operating profit 1,856
Net finance
expense (382)
----------------- ------------------- --------- -------- -------- ---------
Profit before
tax 1,474
----------------- ------------------- --------- -------- -------- ---------
Additions to non-current assets:
Capitalised development costs 903 2,601 - 3,504
-------------------------------------- --------- -------- -------- ---------
* incorporating integrated Amino software and associated
accessories.
5 Exceptional items
Exceptional items included in operating (loss)/profit comprise
the following charges:
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
-------------------------------------------------- ---------------- ----------------
Post-acquisition integration and associated
restructuring costs 289 305
Acquisition and one-off legal costs 227 362
Aborted acquisition costs - 465
Expensed contingent post-acquisition remuneration
in respect of the acquisition of 24i Unit
Media BV - 282
-------------------------------------------------- ---------------- ----------------
Subtotal operating expenses 516 1,414
-------------------------------------------------- ---------------- ----------------
Total exceptional items 516 1,414
-------------------------------------------------- ---------------- ----------------
Exceptional items within net finance expense comprise the
following charges/(credits):
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
--------------------------------------------- ---------------- ----------------
Credit in relation to movement in contingent
consideration - (179)
--------------------------------------------- ---------------- ----------------
Subtotal finance income - (179)
--------------------------------------------- ---------------- ----------------
Unwinding discount on put option liability
regarding non-controlling interest of
the 24i Group - 218
Subtotal finance expense - 218
--------------------------------------------- ---------------- ----------------
Total exceptional items - 39
--------------------------------------------- ---------------- ----------------
Exceptional items are items which are material or non-recurring
in nature and which are therefore presented separately from
underlying operating expenses and income. Material costs may
include: release of contingent consideration no longer payable,
release of royalty costs recognised in prior years and subsequent
renegotiated, redundancy and associated costs, legal and
professional advisor fees in respect of acquisitions costs,
contingent post acquisition remuneration payable and additions,
aborted acquisition costs or releases to the provision for
uncertain tax provisions. Material income comprises amounts outside
the course of normal trading activities.
Furthermore, the Group considers the fair value movement in
contingent consideration and the put option interest charge to be
adjusting items within net finance expenses because they are
non-cash and they do not relate to the day-to-day trading
activities of the Group. They are treated as adjusting items below
adjusted operating profit but not presented on the face of the
consolidated income statement.
6 Earnings per share
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
---------------------------------------------- ---------------- ----------------
(Loss)/profit attributable to shareholders (1,470) 888
---------------------------------------------- ---------------- ----------------
Exceptional items 516 1,414
Share-based payment charges 310 394
Finance income (see note 5) - (179)
Finance expense (see note 5) - 218
Amortisation of acquired intangible assets 2,151 1,424
---------------------------------------------- ---------------- ----------------
Tax effect thereon (256) ( 295)
---------------------------------------------- ---------------- ----------------
Profit attributable to shareholders excluding
exceptional items, share-based payments
and amortisation of acquired intangibles
and associated taxation 1,251 3,864
---------------------------------------------- ---------------- ----------------
Number Number
Weighted average number of shares (Basic) 83,439,943 76,590,374
---------------------------------------------- ---------------- ----------------
Weighted average number of shares (Diluted) 82,832,009 77,780,937
---------------------------------------------- ---------------- ----------------
Basic earnings per share (cents) (1.76) 1.16
Diluted earnings per share (cents) (1.78) 1.14
---------------------------------------------- ---------------- ----------------
Adjusted basic earnings per share (cents) 1.50 5.05
Adjusted diluted earnings per share (cents) 1.51 4.97
---------------------------------------------- ---------------- ----------------
The calculation of basic earnings per share is based on profit
after taxation and the weighted average number of ordinary shares
of 1p each in issue during the period. The Company holds 1,488,254
(H1 2021: 1,778,725) of its own shares in treasury and these are
excluded from the weighted average above. The basic weighted
average number of shares also excludes 242 (H1 2021: 242) being the
weighted average shares held by the EBT in the year.
The number of dilutive share options above represents the share
options where the market price is greater than the exercise price
of the Company's ordinary shares.
7 Cash generated from operations
Six months
ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
------------------------------------------------ ------------ ----------------
(Loss)/profit before tax (811) 1,474
Net finance expense 212 382
Amortisation charge 4,768 3,923
Depreciation of right of use assets 502 596
Depreciation of property, plant & equipment 285 130
Loss on disposal of property, plant & equipment 5 -
Share based payment charge 310 394
Exchange differences 848 304
(Increase)/decrease in inventories (1,429) 84
Decrease/(increase) in trade and other
receivables 2,001 (4,207)
(Decrease)/increase in provisions (5) 9
(Decrease)/increase in trade and other
payables (457) 481
Aborted acquisition deposit - (1,754)
------------------------------------------------ ------------ ----------------
Cash generated from operations before
tax 6,229 1,816
------------------------------------------------ ------------ ----------------
Adjusted operating cash flow before tax was $6.7m (H1 2021:
$4.0m) and is reconciled to cash generated from operations before
tax as follows:
Six months
ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
----------------------------------------- ------------ ----------------
Adjusted operating cashflow before tax 6,745 3,986
----------------------------------------- ------------ ----------------
Post-acquisition and restructuring costs (289) (312)
Acquisition and one-off legal costs (227) (104)
Aborted acquisition deposit - (1,754)
Cash generated from operations before
tax 6,229 1,816
----------------------------------------- ------------ ----------------
Adjusted cash generated from operations before tax is a non-GAAP
measure and excludes cash from exceptional items.
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
--------------------------------------- ---------------- ----------------
Adjusted EBITDA 5,782 8,313
Adjusted operating cashflow conversion
% 116% 48%
Exceptional items (516) (1,414)
Share based payment charge (310) (394)
--------------------------------------- ---------------- ----------------
EBITDA 4,956 6,505
--------------------------------------- ---------------- ----------------
Operating cashflow conversion % 126% 28%
--------------------------------------- ---------------- ----------------
Adjusted EBITDA is a non-GAAP measure and is defined as earnings
before interest, taxation, depreciation, loss on disposal of
property, plant and equipment, amortisation, exceptional items and
share based payment charges.
8 Intangible assets
Movements in intangible assets comprised:
$000
------------------------------------------------------------ --------
Intangible assets - as previously presented at 30 November
2021 96,234
Adjustment to initial estimated fair value on acquisition
- intangible assets (note 9) 500
Adjustment to initial estimated fair value on acquisition
- goodwill (note 9) (390)
Amortisation charge on above fair value changes for year
ended 30 November 2021 (note 9) (480)
Intangible asset - as revised 95,864
Acquisition of subsidiary (note 9) 4,150
Additions 4,156
Amortisation (4,768)
Movement in foreign exchange (2,212)
Intangible assets - as at 31 May 2022 97,190
------------------------------------------------------------ --------
9 Acquisition of subsidiaries
On 4 April 2022, the Group acquired 100% of the issued share
capital of Exabre Limited (trading as "The Filter"), a
UK-headquartered AI-powered video recommendation service for
consideration up to GBP4.0m ($5.2m).
The Filter's technology will significantly accelerate the
roadmap of 24i's video streaming platform by adding enhanced
analytics, recommendations and personalisation to its existing data
analytics services. 24i will also market The Filter's managed
service solution to its existing OTT and Pay TV customers and
prospects as a standalone service.
The acquisition represents a further supportive step along the
Group's 2025 strategy which addresses the convergence of streaming
services and traditional Pay TV. It is also in line with the
Company's objective to acquire key and emerging technologies that
add value to its platform's capabilities.
The preliminary amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are set out
below. A full review of identifiable assets will be completed and
updated in the Group annual report to 30 November 2022.
Estimated
Estimated fair value Estimated
book value adjustment fair value
$000s $000s $000s
------------------------------------------------- ----------- ----------- -----------
Identifiable intangible assets - 2,728 2,728
Right of use assets 72 - 72
Property, plant and equipment 3 - 3
Current assets
* Current trade and other receivables 320 - 320
* Cash and cash equivalent 4 - 4
Liabilities
* Current trade and other payables (259) - (259)
* Lease liability (72) - (72)
* Deferred tax liability - (518) (518)
Total identifiable assets
and liabilities 68 2,210 2,278
------------------------------------------------- ----------- ----------- -----------
Goodwill 1,422
------------------------------------------------- ----------- ----------- -----------
Total consideration 3,700
------------------------------------------------- ----------- ----------- -----------
Fair value
Satisfied by: $000
-------------------------------------------------- -----------
Initial consideration:
* Cash 1,549
Deferred consideration:
* Cash 317
Contingent consideration:
* Cash 1,834
Total consideration transferred 3,700
Net cash outflow arising on acquisition
Cash consideration 1,549
Less: cash and cash equivalent balances acquired (4)
Net cash outflow on acquisition 1,545
-------------------------------------------------- -----------
The estimated goodwill of $1.4m arising from the acquisition
consists of expected growth in the provision of user
personalisation managed services. None of the goodwill is expected
to be deductible for income tax purposes.
Total consideration transferred includes GBP0.3m ($0.3m) of
deferred cash consideration, payable in October 2023. Contingent
consideration is payable, up to GBP2.5m ($3.2m), subject to
achieving certain annual recurring revenue ("ARR") growth. The
contingent consideration will be settled in cash and payable in two
tranches, at the first and second anniversaries of the acquisition.
The estimated value of contingent consideration is $1.8m and has
been based on the latest ARR forecast.
Revenue of $0.1m and a loss of $0.1m between the date of
acquisition and the balance sheet date has been included within the
results to 31 May 2022.
Acquisition in the prior period - Nordija A/S
On 27 May 2021, the Group acquired 100% of the issued share
capital of Nordija A/S, a Danish incorporated entity whose
principal activities are as a streaming and Pay TV platform
specialist, for EUR5.3m ($6.5m).
During the current period, and within the measurement period
(which shall not exceed one year from the acquisition date , an
additional intangible asset was identified which adjusted the
provisional amounts recognised for this business combination. An
intangible asset of $0.6m in relation to a contract asset has
subsequently been recognised. This has resulted in the following
remeasurements to the initial provisional estimated fair value
adjustments:
-- Increase to fair value of identifiable intangibles assets of
$0.5m ($0.6m in relation to the contract asset, less $0.1m
reduction to other identifiable intangible assets previously
recognised);
-- Increase to deferred tax liability of $0.1m in relation to the above adjustment; and
-- Decrease to goodwill of $0.4m (previously reported goodwill of $3.3m)
During the measurement period, the Group shall retrospectively
adjust the provisional amounts recognised at the acquisition date
to reflect new information obtained, as noted above, about facts
and circumstances that existed as of the acquisition date and, if
known, would have affected the measurement of the amounts
recognised as of that date. These changes were identified within 12
months of the acquisition date. The updated fair value of
identifiable assets and liabilities at the acquisition date is
disclosed in the below table.
Fair value Adjustment
adjustment to initial
as previously estimated
Book value reported fair value Fair value
$000s $000s $'000 $000s
------------------------------------------------------------ ---------- -------------- ----------- ----------
Identifiable intangible assets 2,523 1,865 500 4,888
Right of use assets 468 - - 468
Property, plant and equipment 115 - - 115
Non-current trade and other
receivables 41 - - 41
Current assets
* Current trade and other receivables (excluding
Deferred Revenue) 787 (90) - 697
* Cash and cash equivalents 269 - - 269
Liabilities
* Current trade and other payables (1,781) (66) - (1,847)
* Lease liability (468) - - (468)
* Deferred tax liability (252) (410) (110) (772)
Total identifiable assets
and liabilities 1,702 1,299 390 3,391
------------------------------------------------------------ ---------- -------------- ----------- ----------
Goodwill 2,950
------------------------------------------------------------ ---------- -------------- ----------- ----------
Total consideration 6,341
------------------------------------------------------------ ---------- -------------- ----------- ----------
The contract asset of $0.6m is to be amortised in line with the
associated customer contract revenue recognition. Accordingly,
$0.5m should have been recognised in the consolidated income
statement for the year ended 30 November 2021 as amortisation on
acquired intangibles. Furthermore, $0.1m of the incremental
deferred tax liability recognised in relation to the contract asset
should have been released in the consolidated income statement for
the year ended 30 November 2021.
Fair value
Satisfied by: $000
------------------------------------------------------------ -----------
Initial consideration:
* Cash 5,018
* Equity instruments (315,511 ordinary shares of
Aferian plc) 659
Contingent consideration:
* Cash 144
* Equity instruments (292,030 ordinary shares of
Aferian plc) 704
Total consideration before discounting 6,431
Fair value adjustment in relation to discounting
contingent consideration (90)
------------------------------------------------------------ -----------
Total consideration transferred 6,341
Net cash outflow arising on acquisition
Cash consideration 5,018
Less: cash and cash equivalent balances acquired (269)
Net cash outflow on acquisition 4,749
------------------------------------------------------------ -----------
The fair value of the financial assets included trade
receivables with a fair value of $0.5m and a gross contractual
value of $0.6m. The best estimate at acquisition date of the
contract cash flows not to be collected is $0.1m.
The goodwill of $3.0m arising from the acquisition consists of
expected growth in the sale of online video apps and solutions.
None of the goodwill is expected to be deductible for income tax
purposes.
Following successful completion of the targets to date
associated with the contingent consideration, the Company paid an
amount of EUR0.4m ($0.5m), of which EUR0.1m ($0.1m) was settled in
cash, during the current period. The EUR0.3m ($0.4m) was settled by
the issue of 222,430 new ordinary shares of 1p each in the capital
of the Company ("Ordinary Shares") at the price agreed at the date
of the original acquisition of 148 pence per ordinary share. The
remaining EUR0.1m ($0.2m) of contingent consideration is expected
to be settled by 30 November 2022.
The costs of the acquisition were $0.4m. No revenue or profit
between the date of acquisition and the balance sheet date has been
included within the results to 31 May 2021 as the contribution was
deemed to be immaterial. If the acquisition of Nordija had been
completed on the first day of the financial period, Group revenues
for the prior period would have been $47.3m and Group profit after
tax would have been $0.9m.
10 Cautionary statement
This document contains certain forward-looking statements
relating to the Group. The Group considers any statements that are
not historical facts as "forward-looking statements". They relate
to events and trends that are subject to risk and uncertainty that
may cause actual results and the financial performance of the Group
to differ materially from those contained in any forward-looking
statement. These statements are made by the Directors in good faith
based on information available to them and such statements should
be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking information.
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END
IR FZGZRRZDGZZM
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