TIDMAFRN
RNS Number : 5063Z
Aferian PLC
16 May 2023
16 May 2023
AFERIAN PLC
("Aferian", the "Company" or the "Group")
FULL YEAR RESULTS FOR THE YEARED 30 NOVEMBER 2022
- Progress on software-led strategy with record software
revenues and improving quality and visibility of earnings
- Structural industry shift towards convergence of video
streaming services and traditional pay TV supports strategic
positioning and growth ambitions
- Continued 24i new business momentum in H1 in line with
expectations with recovery in Amino expected later in the financial
year
Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions
company, announces its results for the year ended 30 November
2022.
Donald McGarva, Chief Executive Officer of Aferian plc,
said:
"Aferian delivered record software revenues up 8% to $24.1m in
2022 against a challenging macroeconomic environment. We have
continued to invest in innovation across the Group, strengthening
our data-centric product offering and are seeing increasing quality
of engagement with current and prospective customers.
"The wider macroeconomic environment during the year led some
customers to review their capital expenditure and delay new orders,
with particular impact on Amino device revenues and Group cash
flow. While Amino continues to have a strong sales pipeline for the
second half of 2023, this customer trend has continued longer than
we expected into the first half of this year. Conversely, 24i has
continued its strong new business momentum into the first half of
2023. Aligned to our goals, the quality and visibility of our
earnings has continued to improve as we entered the new financial
year with Annual Recurring Revenue (ARR) 23% higher than last
year.
"Post period end, we have taken several actions to reduce the
Group's operating cost base and capital R&D spend in order to
streamline the way we do business and position us for future
growth. Video streaming is everywhere, all the time and Aferian is
well-positioned to benefit from the continued convergence of
streaming and pay TV across our industry."
Financial Key Figures
Change
US$m unless otherwise stated 2022 2021 %
----------------------------------- ------- ----- -------
Revenue 91.1 92.9 (2%)
Exit run rate Annual Recurring
Revenue (ARR) (2) 18.7 15.2 23%
Statutory operating (loss)/profit (16.6) 5.2 N/A
Statutory operating cash flow
before tax 6.4 14.1 (55%)
Statutory basic (loss)/earnings
per share (US cents) (20.5) 7.0 N/A
Adjusted operating profit (3) 7.5 11.8 (36%)
Adjusted operating cash flow
before tax (4) 8.9 16.7 (46%)
Adjusted basic earnings per share
(US cents) (5) 6.6 11.5 N/A
----------------------------------- ------- ----- -------
Net cash 4.0 14.2 (72%)
Dividend per share (pence) 1.0 3.1 (68%)
Notes
(1) Constant currency basis calculated using the closing FX rate
for FY21 in both years.
(2) Exit run rate ARR is annual run-rate recurring revenue as at
30 November 2022.
(3) Adjusted operating profit is a non-GAAP measure and excludes
amortisation of acquired intangibles, impairment of goodwill
exceptional items and share-based payment charges
(4) Adjusted operating cash flow before tax is a non-GAAP measure
and excludes exceptional items and impairment of goodwill.
(5) Adjusted basic earnings per share is a non-GAAP measure and excludes
amortisation of acquired intangibles, impairment of goodwill,
exceptional items and share-based payment charges.
Financial Highlights
-- Progress in the Group's transformation to a software-led business:
o Record higher-margin software and services revenue of $24.1m,
up 8% year-on-year.
-- Further momentum demonstrated in improving the quality and visibility of Group earnings:
o Recurring revenue of $16.1m, up 25% year-on-year.
o Exit run rate ARR of $18.7m, up 23% year-on-year.
-- The wider macroeconomic environment led to some customers
temporarily reducing capital expenditure and delaying new orders,
resulting in a decline in revenues in the Amino device business and
a weaker operating cash flow performance.
o Device revenues were down 5% year-on-year, leading to reported
revenue of $91.1m for 2022 (2021: $92.9m).
o Adjusted EBITDA of $14.6m, down 21% year-on-year, due to the
decline in Amino device revenues.
o $12.5m non-cash impairment loss recognized on goodwill which
was included in the statutory operating loss
-- Good operating cash flow generation despite significant
investment in inventory to mitigate global supply chain disruption
during the period.
o Adjusted cashflow from operating activities before tax was
$8.9m (2021: $16.7m) representing an adjusted EBITDA cash
conversion of 61% (2021:91%)
-- No final dividend payment (2021: 2.09 pence / 2.87 US cents),
resulting in a total dividend for the year of 1.0 pence (1.26 US
cents) (2021: 3.09 pence / 4.26 US cents)
Strategic and Operational Highlights
-- Strengthened our data-centric product portfolio
o Acquisition of The Filter , now fully integrated with 24i, is
attracting new customers and offering new capabilities for existing
customers.
o Launched 24iQ : the Group's personalisation and content
recommendation service, shortlisted for four separate innovation
awards in the USA and Europe.
-- Continued innovation in consumer experience and product capability:
o 24i: Strong market response to launch of 24i Mod Studio as the
new identity and go to market name for 24i's video streaming
platform, highlighting its flexibility and modularity. Launched new
fully managed, cloud-hosted TV as a Service solution,
FokusOnTV.
o Amino: Launched new version of the device management platform
targeting the $1.6bn global digital signage market, with
encouraging initial traction. Over 120 customers have now deployed
our SaaS device software management platform.
-- Supported customers with critical, innovative rollouts and deployments:
o 24i: Supported KAN, the Israeli Public Broadcasting
Corporation, enhancing the experience for its viewers on multiple
Smart TV devices to watch the FIFA World Cup. FokusOnTV launch led
to new partnership with Swisscom Broadcast and the addition of
three new customers.
o Amino: Device management platform enabled Vodafone Iceland to
upcycle its deployed base of video streaming devices with enhanced
video streaming services. Supported PCCW to publicly launch its new
generation of Now TV streaming services, facilitating the
integration of Netflix and other third-party streaming content
alongside its own.
Post period end update
-- Actions to identify and deliver efficiencies in the Group's cost
base have reduced the Group's annualized cost base by c.$5m, underpinned
by efficiencies identified in the operations and research & development
teams of both our 24i and Amino divisions.
-- As of 25 April 2023, Donald McGarva stepped-in to the role of 24i
CEO, alongside his existing duties as CEO of parent company, the
Aferian group. He will lead 24i for the foreseeable future.
-- Board Changes:
o Max Royde appointed Non-Executive Director on 4 April 2023 and
was subsequently appointed Chair of the Remuneration Committee.
o Steve Vaughan stepped down as Non-Executive Director and Chair
of the Remuneration Committee on 27 April 2023.
-- At the date of this announcement, the Group is in compliance with
its banking covenants and is in discussions with its banks regarding
its current facility arrangements.
Current trading and outlook
We expect to report growth in the 24i division (which focusses
on streaming video experiences) in H1 FY23 over H1 FY22, reflecting
the Group's position in the fast-growing video streaming
market.
For the Amino division (which connects Pay TV to streaming
services), as previously announced on 10 March 2023, the impact of
the wider macro-economic situation has continued for longer than we
expected. Therefore, device sales in H1 FY23 have been materially
lower than initially anticipated. While Amino continues to have a
strong medium-term sales pipeline, we expect Amino's full year
revenue for FY23 to be significantly lower than delivered in FY22.
The FY23 outcome for Amino remains heavily dependent on the receipt
of expected orders that have, to date, been deferred or delayed.
However, we have been encouraged by the recent receipt of the first
material order in seven months from one of our US distributors.
In light of the Amino performance, we have taken appropriate
steps to identify and deliver significant efficiencies in the
Group's cost base during the first quarter of 2023 to improve
margins and cash generation.
Following the investment made in inventory within the Amino
business, the Group currently has a net debt position, and expects
this to continue throughout the current financial year. As
previously announced on 10 March 2023, we expect Group revenue and
adjusted EBITDA for FY23 to be significantly below FY22, albeit
that the Group is expected to generate a material positive
EBITDA.
For further information please contact:
Aferian plc +44 (0)1954 234100
Mark Wells, Chairman
Donald McGarva, Chief Executive Officer
Mark Carlisle, Chief Financial Officer
Investec plc (NOMAD and Broker) +44 (0)20 7597 5970
David Anderson / Patrick Robb / Nick Prowting
/ Cameron MacRitchie
FTI Consulting (Financial communications) +44 (0)20 3727 1000
Matt Dixon / Emma Hall / Tom Blundell / Aisha
Hamilton
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's AIM stock
market (AIM: symbol AFRN). Headquartered in Cambridge, UK, the
Company has over 350 staff located in offices in San Francisco,
Amsterdam, Helsinki, Copenhagen, Madrid, Porto, Brno, Buenos Aires,
and Hong Kong. For more information, please visit www.aferian.com
.
Chairman's statement:
In 2022, Aferian made good progress with its key ambition of
becoming a software-led company. During the year, Aferian increased
its higher margin software and services revenues by 8% to $24.1m
and has grown exit annualised run rate recurring revenue (ARR) by
23% to $18.7m. However, challenging macro-economic conditions in
the second half of the year negatively impacted device revenues,
meaning that total Group revenues declined by $1.8m to $91.1m.
In my report last year, I explained that the Group is at the
heart of a structural industry shift towards convergence of video
streaming services and traditional pay TV. Today, video streaming
is omnipresent. While Aferian doesn't address the household-name
streaming giants like Netflix, and you won't see our name on
screen, we are very much part of this booming market behind the
scenes. Our B2B solutions power the tier 1 to tier 4 companies who
distribute video to consumers.
Aferian's portfolio of video streaming products and services
combine the cost savings and fast time-to-market of white label
solutions with an advanced level of configurability. This allows
our customers to create unique and attractive consumer experiences.
This focus on building a configurable, integrated video streaming
platform differentiates Aferian from its competitors.
On a divisional level, the Board is confident that investments
made in 2022 in enhancing the 24i video streaming platform will
ensure 24i continues to deliver double digit percentage revenue and
ARR growth in 2023. The launch of 24i's fully managed TV as a
service platform in September 2022 illustrates that the Group is
continuing to expand its product roadmap with a focus on continual
improvement of the consumer experience whilst decreasing costs and
operational complexity for its customers.
Macro-economic conditions for the Amino video streaming device
business in the second half of 2022 were challenging and negatively
impacted revenues and operating cash flow. As indicated in our
March 2023, trading update, this has worsened in the first half of
2023. That said, this business has historically maintained strong
gross profit margins and in 2022 the Group invested in expanding
its product line into digital signage, additional software-led
device management tools as well as inventory to de-risk the
well-publicised, industry-wide hardware supply chain challenges.
The Board is, therefore, confident that this division is well
placed to capitalise on the growth opportunities it sees in the
video streaming market in the second half of the year and
beyond.
The acquisition of The Filter in April 2022 strengthened the
Group's data-centric product portfolio by adding its advanced video
streaming analytics, recommendations and personalisation service.
Personalisation is becoming a key consumer pre-requisite and we are
now able to deliver this. Unfortunately, as previously disclosed,
due to adverse factors the Group was unable to complete a material
and transformational acquisition that had been planned for the
second half of 2022. While M&A growth remains a core part of
our strategy, our focus in 2023 will be on driving organic growth
and profitability to deliver strong levels of cash generation until
markets normalise.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We have continued to make excellent progress on our ESG
commitments. This year, the Board set ESG targets for the
Executives for the first time. I am pleased to report these targets
were met in full, including the removal of all non-recyclable
packaging from the Group's supply chain. We will continue this
focus on ESG in the coming year with both internal and external
initiatives on sustainability, equality and diversity.
BOARD CHANGES
2022 has seen several changes to the Group's Board of Directors.
Erika Schraner stood down in July 2022 after three years as a
Non-Executive Director. Joachim Bergman also left the Board in
April 2022 after stepping down as 24i CEO. Steve Vaughan,
non-executive director of Aferian since March 2019 and chair of the
Remuneration Committee during the year, resigned from the Board on
27 April 2023. I thank them all for their valuable contribution to
the success of the Group during their tenure. I was pleased to
welcome Bruce Powell MBE to the board as a Non-Executive Director
and Chair of the Board's Audit Committee in August 2022. At the
same time, Steve Oetegenn transitioned from Non-Executive Director
to a new Executive Director role as Group President of the
Americas. On 4th April 2023, Max Royde was also appointed to the
Board as a Non-Executive Director. Following the resignation of
Steve Vaughan, Max Royde took up the position of Chair of the
Board's Remuneration Committee on 27 April 2023. Max is a managing
partner at Kestrel Partners, an investment management company
specialising in business-critical software companies, which has a
beneficial holding in Aferian. At the time of his appointment, this
holding amounted to 22,781,891 shares or 26.12% of the issued share
capital of the Company.
We are keenly aware of the need for both diversity and a balance
between Executive and Non-Executive Directors on the Board. We are
currently reviewing the composition of the Board and expect to
improve the diversity of its membership in the coming 12
months.
DIVID
In August 2022, the Company paid an interim dividend of 1.0 GBP
pence (1.26 US cents*) per share in respect of the year ended 30
November 2022. The Board is not proposing a final dividend (2021:
2.09 pence / 2.87 US cents). This represents a total dividend for
the year of 1.00 GBP pence (1.26 US cents) per share (2021: 3.09
pence / 4.26 US cents) and is 19% of adjusted earnings per share.
This is lower than the Group's stated policy of 33-50% of adjusted
earnings per share and reflects the short-term impact on the Group
of the challenging macro-economic environment in the first half of
2023.
SUMMARY
Aferian addresses the fast-growing video streaming market with
forward-thinking technology solutions. The 24i division's
performance has been robust and it is expected to continue to grow
during FY23, which leads the Board to remain positive about
prospects for the Group.
As announced on 10 March 2023, the challenging macro-economic
environment and, in particular, the impact of lower shipping and
production lead times have resulted in both our US distributors and
their clients wishing to reduce inventory levels. This has resulted
in significantly decreased sales within the Amino division in the
first half of FY23. The management team therefore took appropriate
steps to identify and deliver significant operating cost
efficiencies during the first quarter of 2023, to improve margins
and cash generation over the remainder of the year.
Whilst the speed of recovery in sales within the Amino division
remains uncertain, the Board is encouraged by its strong
medium-term sales pipeline. The Board is confident that the steps
taken to reduce the Group's cost base have not compromised its core
strengths in software, or the ability of the Amino division to
recover as the market for streaming devices normalises.
Mark Wells
Chairman
15 May 2023
* Average FX rate for the year was GBP1 : $1.26 (2021: GBP1 :
$1.38).
Chief Executive Officer's Review
INTRODUCTION
Aferian's transition to a software-led business has continued to
make progress in 2022 and, aided by both organic growth and the
acquisition of The Filter in April 2022, software revenues grew to
a record $24.1m in the year. Management's focus in 2022 was to
continue to grow recurring revenues whilst also accelerating the
transformation of the Aferian Group to a software-led business by
investing in accretive acquisitions. Recurring revenue growth was
achieved as exit annualised run rate revenues ("ARR") increased by
23% to $18.7m. Whilst we completed one small acquisition in April
2022, unfortunately, we were forced to abort a transformational
acquisition in October 2022 having invested a significant amount of
time and effort on the process.
As previously communicated, the wider macro-economic situation
also resulted in a decline in revenues within the Amino device
business. Rising interest rates have understandably led to our
customers looking more carefully at their investment in working
capital and seeking to defer capital expenditure. As a result, we
have seen some customers delaying their orders of new streaming
devices, preferring to run down their existing inventory rather
than maintaining stock levels at this time.
We, therefore, report revenue for 2022 of $91.1m (2021: $92.9m),
which includes a $3.5m decrease in device revenues compared to
2021.
Whilst we have experienced device revenues being negatively
impacted by current economic headwinds in the first half of 2023,
we have confidence in the medium and long-term growth drivers of
the video streaming market as well as Aferian's ability to address
that market. In February 2023, we completed a restructuring
programme to improve the efficiencies of the Group's operations
during which we took the difficult but necessary decision to reduce
the Group's operating cost base by c.$2.9m and capital research and
development spend by c.$1.8m.
These cost reductions were underpinned by efficiencies
identified in the operations and research and development teams of
both our 24i and Amino divisions. In our 24i video streaming
platform division, cost savings were identified as the culmination
of synergies generated by merging the operations and management of
24i, Nordija and The Filter. Despite these cost reductions, we
continue to expect 24i to deliver double digit percentage growth in
both revenue and ARR in 2023. In addition, cost reductions in the
Amino business were made, whilst retaining the core talent who are
delivering new opportunities which we expect to drive growth in the
second half of the year.
At the date of the approval of this document, the Group remains
in compliance with its banking covenants and, as we disclosed on 10
March 2023, discussions are ongoing regarding its current facility
arrangements. Further details are provided in the CFO report and
note 2 to the condensed consolidated financial statements
below.
MARKET GROWTH
Aferian's video streaming platforms serve a fast-growing market
that continues to be driven by the consumer-led transition from
traditional linear TV to video streamed over the internet anytime
and anywhere. The global video streaming market continues to grow
and is fast becoming the most popular way to consume video. For
example, in July 2022 monthly Nielsen data showed that, for the
first time, video streaming accounted for a larger audience share
(34.8%) in the US than either cable TV (34.4%) or broadcast TV
(21.6%). In addition, average global video viewing time (minutes
consumed per day) is predicted to continue to increase at around
10% 1 until at least 2026 2 .
Growth in Aferian's 24i video streaming platform revenue is
expected to be driven by the launch of new video streaming services
using Aferian's platforms and the continued growth in those
streaming services as a result of the above trends. In addition,
all video service providers, including our Pay TV, broadcast and
content owner customers are investing in upgrading their streaming
infrastructure and operations to keep pace with the latest features
offered by market leaders such as Netflix and Disney+.
For Pay TV operators, it's not just about keeping up with these
giants of the streaming industry, they also need to partner with
those giants - offering consumers a way to access the
widest-possible range of content from a single device. This cannot
be done using traditional linear satellite and cable technology;
hence operators need to continue investing in next-generation,
content-aggregating, managed streaming devices.
Media headlines that focus on churn rates for the leading video
streaming services naturally miss a great deal of the nuance in
this dynamic market. In March 2022, a quarter of US consumers were
found to have cancelled a streaming video service in the past 12
months only to re-subscribe to the same service. In the United
Kingdom, Germany, Brazil, and Japan, the figure for this "churn and
return" behaviour is around 22% overall, and globally it's the
younger generations of subscribers who are most likely to come back
3 .
Although cost-of-living pressures will inevitably make our
customers look harder at their cost base and the prices they charge
their consumers, we believe this presents an opportunity for the
Group. Our cost-effective, off-the-shelf solutions and managed
services represent an excellent alternative for video service
providers who want to continue delivering great consumer
experiences but are re-assessing the value of their current
custom-built solutions and the cost of employing in-house
expertise.
1 Boston Consulting Group, 2021
2 Deloitte, 2009 State of the Media Democracy survey
3 Deloitte, 2022 Digital Media Trends survey
2022 KEY PERFORMANCE INDICATORS
The Group reported a decrease in revenue of 2% driven by lower
video streaming device sales. Importantly, however, software and
services revenue has increased by 8% and exit run rate ARR by 23%
(32% on a constant currency basis). Adjusted gross profit margin
was 2 percentage points lower than the prior year. The Group also
continues to generate good operating cash flows, albeit reduced by
the strategic impact of the investment in inventory made in the
year to mitigate against supply chain disruptions. The Group
reports a net customer revenue retention rate 4 of 107% (2021:
117%). This is due to growth in the subscriber base of our existing
customers during the year, in addition to a very low customer churn
rate.
2022 2021 Change
$m $m %
------------------------------------- ------ ------ --------
Total revenue 91.1 92.9 (2%)
Software & services revenue 24.1 22.4 8%
Annual run rate recurring revenue
("ARR") at 30 November 18.7 15.2 23%
Adjusted operating cash flow before
tax 8.9 16.7 (55%)
Net customer revenue retention rate
on recurring revenue* 107% 117% (16%)
------------------------------------- ------ ------ --------
*Net customer revenue retention rate on recurring revenue based
on constant currency basis.
In 2022, the Group invested heavily in 24i sales and marketing
as well as research and development to successfully drive growth in
recurring revenue, although negatively impacting both cash flow and
profit margins. In addition, in order to mitigate against potential
supply chain delays in the second half, Amino invested in inventory
of streaming devices which required further investment in working
capital. In 2023, the management team will focus on reducing
inventory and improving cash flows whilst also improving the
returns generated by the investments already made in 24i.
4 Net revenue retention rate is calculated by reference to
recurring revenue from existing customers, including upsells, less
recurring revenue lost from customer churn during the year
OPERATIONAL REVIEW
The Group has two operating divisions: 24i and Amino.
24i
24i offers a robust video streaming platform that supports all
the key use cases a video content owner must address in order to
prepare and stream TV and video content to the full range of
consumer connected devices. Operating since 2009, 24i serves Pay TV
operators, broadcasters and content owners in Europe, North
America, Latin America and the Middle East.
The market has responded well to the December 2021 launch of 24i
Mod Studio as the new identity and go to market name for 24i's
video streaming platform. This was designed to highlight the
flexibility and modularity of the platform as well as 24i's turnkey
solutions for different verticals. In September 2022, Mod Studio
was named "Best TV Everywhere or Multi-screen Video" solution in
the CSI Awards, a leading industry barometer of streaming
technology.
New customer wins in the period have included KAN, the Israeli
Public Broadcasting Corporation, and SEGI.TV in North America. In
addition, in September 2022, 24i launched its new fully managed,
cloud-hosted TV as a Service solution, FokusOnTV. This is based on
the technologies of Nordija, which it acquired in May 2021, and has
resulted in a new partnership with Swisscom Broadcast and the
addition of three new customers to this service.
The acquisition of The Filter in April 2022 led to the launch of
24iQ, a new data-driven, fully managed personalisation service in
May 2022. 24iQ is offered as an integrated solution or a standalone
service. Work to integrate the 24iQ technology and expertise into
24i Mod Studio is complete and the solution is being deployed to
the first Mod Studio customers. Since its launch, 24iQ has been
shortlisted for four separate innovation awards in the USA and
Europe.
24i continues to grow recurring revenue and has reported a
significant year-on-year increase of 29% in exit run rate ARR (40%
increase year-on-year on a constant currency basis). This growth is
as a result of low customer churn and subscriber growth in our
customers' video streaming services which has led to increased use
of recurring software licenses. Growth has also resulted from the
use of an increased range of 24i solutions. For example, we have
supported existing customers 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.
Notwithstanding this excellent performance, I believe further
performance enhancements can be made. For this reason, in April
2023, I decided to step-in as CEO of the 24i division. Investments
made in sales and marketing in 2022 have resulted in an increase in
the rate of new business wins. For 2023, the 24i management team
and I are focused on growing revenue and ARR at double digit
percentages, whilst also increasing profit margins. In addition,
investment in research and development will be reduced in 2023 now
that the initial phase of the 24i video platform development has
been completed .
Amino
Amino's managed video streaming devices enable Pay TV operators
to bring their live and on-demand content to every connected
household with the quality of service and level of support that
consumers demand for their big-screen viewing experience. Amino has
recently celebrated its 25th anniversary as a force for innovation
and growth in the video streaming market.
Our SaaS device management platform remains a key differentiator
for Amino in the Pay TV market. During the year, we added a new
dashboard that better visualises customer service KPIs. This
enables more proactive customer support, helping our customers to
keep their video services running smoothly. 120 customers have now
deployed the SaaS platform solution, leading to a 5% year-on-year
growth in the number of end-user devices managed. Combined with
Amino's streaming device operating system, this device management
platform enabled Vodafone Iceland to upcycle their deployed base of
video streaming devices with enhanced video streaming services.
This project was completed in partnership with 24i whose software
is also part of the Vodafone Iceland device ecosystem. In addition,
this platform was also deployed at PCCW in Hong Kong which launched
its Now TV video service using Amino's software to integrate
Netflix alongside PCCW's own selection of live and on-demand
content.
In May, we launched a new version of this device management
platform specifically targeting at the needs of the $1.6bn global
digital signage market. We have seen encouraging developments in
the growing digital signage market, including new business in 2022
with a leading UK-based audio-visual provider to supply video
streaming devices that deliver high-quality live video content to a
leading chain of betting shops around the UK and Ireland.
In the first half of 2022, our device revenues were impacted by
global supply chain challenges including shipping and production
delays, caused principally by COVID-19 related manufacturing
shutdowns in China. Second half device production was , therefore,
weighted into the third quarter of the year in order to mitigate
any further potential delays. Following this, well-documented
global economic headwinds, which have resulted in increased
interest rates, led some customers to delay device orders as they
seek to temporarily reduce working capital and defer capital
expenditure. As a result, device revenues were down 5% year-on-year
and inventory levels increased, negatively impacting operating cash
flows.
These economic headwinds continue to negatively impact device
sales in the first half of 2023. Management had forecast a decrease
in device sales for a share of FY23 due to shortened supply chain
lead times. Consequently, the assumptions used in the review of the
carrying value of Goodwill relating to the Amino business have been
revised, which reflect the expected, based on a probability
expected basis, negative impact of both the current macro-economic
uncertainty as well as a more conservative view of long-term
performance and growth rates of streaming devices. Following these
revisions an impairment to the carrying value of this goodwill of
$12.5m has been recorded.
Despite these near-term headwinds , in the second half of 2023
we expect a return to growth in streaming devices and device
management software having invested in both new product lines such
as digital signage as well as sales and marketing in new geographic
markets in 2022.
The focus of the Amino management team in 2023 will be to reduce
inventory levels and improve working capital as well as to drive
additional orders as anticipated growth returns in the second half
of the year.
M&A
In April 2022, we completed the next step in our targeted
M&A programme with the acquisition of The Filter, a
UK-headquartered, AI-powered video recommendation service for an
initial consideration of GBP1.2m ($1.5m). An additional
consideration of up to GBP2.5m ($3.2m) for this acquisition is
payable on achievement of certain ARR growth over the first two
years.
The Filter's managed services combine cutting-edge data science,
analysis and machine learning technologies to help consumers find
and watch more of the video content they love. This technology has
now been fully integrated into 24i and has been launched as 24iQ, a
standalone managed service which combines the Filter's enhanced
analytics, recommendations and personalisation with 24i's existing
data analytics services.
More and more of our customers are looking for innovative ways
to personalise their services for individual consumers, improving
the speed at which each user can find content that's appealing to
them on the device of their choice. Harnessing the power of the
data available in video streaming services to optimise the user
experience in this way is an essential strategic step to drive
customer satisfaction and retention to counteract churn and protect
revenue.
A further, significant acquisition opportunity which would have
been transformational for the Group was aborted at an advanced
stage in October 2022, resulting in a one-off charge of
approximately $5.1m. Whilst M&A remains a core part of our
medium-term software-led strategy to grow the business, the
management team 's focus in 2023 will be on organic growth and cash
generation.
ENVIRONMENT, SOCIAL AND GOVERNANCE ("ESG")
Aferian has continued to focus on ESG in 2022 and we published a
detailed update to our ESG report in August 2022. For the first
time, the Executive Team were given specific ESG targets by the
board, all of which were achieved before year end. Examples of our
achievements in this area include:
-- All our Tier 1 hardware suppliers operate under our Code
of Conduct, which aligns with the Responsible Business Alliance
(RBA) Code of Conduct and the UN Global Compact. In 2022
we completed the audit of these Tier 1 hardware suppliers
using RBA recognised auditors to enhance and complement
our existing facility audit programmes.
-- This year we completed a project to eliminate all non-recyclable
packaging from our product supply chain. Plastic packaging
and cable ties have now been replaced with paper-based products
that can be recycled in most households. We also upcycled
more than 2 metric tonnes of Amino streaming devices.
-- In October 2022 we launched an internal initiative called
"Do The Right Thing" that is designed to highlight the importance
of ESG topics to Aferian's staff and to inspire them to
get involved in making a difference both in their local
communities and to Aferian's overall ESG performance. We
are pleased to see the enthusiastic way in which staff have
embraced the campaign, already suggesting creative ways
in which the Group can advance make greater progress towards
sustainability and its target of making all Group offices
Carbon Neutral by 2025.
-- Our global #FutureIsBright graduate programme has admitted
its second cohort of trainees, including the first graduate
of our partnership with the pioneering non-profit organisation
Czechitas which trains women in the Czech Republic for jobs
in IT. This year we have increased our involvement with
Czechitas, providing mentors for trainees as well as sponsorship,
industry talks and office tours.
It is important that we pay tribute to the continued dedication
and commitment of Aferian's people around the world who have once
again delivered a sterling performance in the face of ongoing
supply chain challenges as well as economic factors beyond their
control. While most of the world has enjoyed a growing sense of
post-pandemic normality this year, our team in Hong Kong has still
faced significant disruption to their personal and working lives as
a result of COVID-19 restrictions. We are proud of the resilience
and fortitude with which they have borne this enduring situation
and thank them for their continued hard work and good humour in the
most difficult of circumstances. At the same time, our small but
valued team of developers based in Ukraine has continued to work as
normally as possible under the most extraordinarily difficult
circumstances since the start of the conflict in February 2022. I
wish to personally thank all our staff for their contribution to
our performance during 2022.
CURRENT TRADING AND OUTLOOK
We expect to report growth in the 24i division (which focusses
on streaming video experiences) in H1 FY23 over H1 FY22, reflecting
the Group's position in the fast-growing video streaming
market.
For the Amino division (which connects Pay TV to streaming
services), as previously announced on 10 March 2023, the impact of
the wider macro-economic situation has continued for longer than we
expected. Therefore, device sales in H1 FY23 have been materially
lower than initially anticipated. While Amino continues to have a
strong medium-term sales pipeline, we expect Amino's full year
revenue for FY23 to be significantly lower than delivered in FY22.
The FY23 outcome for Amino remains heavily dependent on the receipt
of expected orders that have, to date, been deferred or delayed.
However, we have been encouraged by the recent receipt of the first
material order in seven months from one of our US distributors.
In light of the Amino performance, we have taken appropriate
steps to identify and deliver significant efficiencies in the
Group's cost base during the first quarter of 2023 to improve
margins and cash generation.
The Group is currently trading, and expects to finish the
current financial year, in a net debt position. As previously
announced on 10 March 2023, we expect Group revenue and adjusted
EBITDA for FY23 to be significantly below FY22, albeit that the
Group is expected to generate a material positive EBITDA.
Donald McGarva
Chief Executive Officer
15 May 2023
Chief Financial Officer's Review
OVERVIEW
Whilst showing a decline in total revenue, the Group's financial
results for the year ended 30 November 2022 demonstrate continued
progress against the Group's primary financial objectives: to grow
high margin software & services revenue, with a focus on
recurring revenue.
High margin software & services revenue increased by 8% to
$24.1m (2021: $22.4m). Software & services adjusted gross
profit represented 45% of total adjusted gross profit in the year,
an increase from 42% in 2021. Adjusted gross margin has remained
broadly consistent with the prior year at 46% (2021: 48%). In
addition, the visibility of the Group's revenues increased as exit
run rate Annual Recurring Revenues (ARR) increased to $18.7m (2021:
$15.2m), representing growth of 23%. On a constant currency basis,
exit run rate ARR increased by 32%.
However, device revenues decreased by $3.5m year-on-year and, as
a result, total revenue decreased by 2% to $91.1m (2021:
$92.9m).
The Group continued to generate good operating cash flows albeit
reduced due to the additional $6.7m strategic investment in
inventory made during the year. Adjusted operating cash flow before
exceptional costs was $8.9m (2021: $16.7m) representing an adjusted
EBITDA cash conversion of 61% (2021: 91%). Operating cash flow was
$6.4m (2021: $14.1m).
The Group had net cash of $4.0m at 30 November 2022 (2021:
$14.2m). The Group has a banking facility with Barclays Bank plc,
Silicon Valley Bank, and Bank of Ireland of which the Group had
drawn $7.5m at 30 November 2022 (2021: $nil). This facility of
$50m, split evenly across the new three bank club, also includes up
to a further $50m available by way of an accordion. On 30 December
2022, the Group executed an amendment letter to update the covenant
definition in the existing banking facility which has a committed
term to 23 December 2024 with options to extend by a further one or
two years. As part of the amended covenant definition, the amount
of available facility is subject to a cap of 2.5 times the amount
of 12 month rolling Adjusted Lender EBITDA, tested on a monthly
basis. We have prepared a base case cash flow forecast covering a
period of at least 12 months from the date of approval of the
financial statements and various sensitivity analyses. If the base
case forecast is achieved, the Group and parent company will be
able to operate within the monthly liquidity covenant test.
However, the recovery of the Amino division revenues, continued
growth in 24i division revenues and cash conversion expected in H2
2023 are key assumptions. Failure to achieve the base case view of
forecast sales pipeline conversion assumed in the base case
forecast could result in the Group failing to comply with financial
covenants associated with its existing banking facility,
potentially resulting in the facilities being withdrawn. We are
currently in further active discussions with the Group's existing
loan facility providers to negotiate a further covenant definition
revision taking account of current management forecasts however
there is currently no certainty as to the outcome of these
discussions with the lender as referred to in Note 1 of the
financial statements.
REVENUE AND ADJUSTED GROSS PROFIT
2022 2021 Change
$m $m
------------------------------ ------ ----- -------
Software & services
Revenue
Recurring 16.1 12.9 25%
Non-recurring 8.0 9.5 (16%)
Total revenue 24.1 22.4 8%
Adjusted gross profit 19.0 18.4 4%
Adjusted gross profit margin
% 79% 83% (4%)
------------------------------ ------ ----- -------
Devices including integrated
software
Revenue
Non-recurring 67.0 70.5 (5%)
Total revenue 67.0 70.5 (5%)
Adjusted gross profit 23.0 26.3 (13%)
Adjusted gross profit margin
% 34% 37% (3%)
------------------------------ ------ ----- -------
Total
Revenue
Recurring 16.1 12.9 25%
Non-recurring 75.0 80.0 (6%)
Total revenue 91.1 92.9 (2%)
Adjusted gross profit 42.0 44.7 (6%)
Adjusted gross profit margin
% 46% 48% (2%)
------------------------------ ------ ----- -------
Devices revenue (which includes integrated software) decreased
by 5% year-on-year. In the second half of the year global economic
headwinds which have resulted in increased interest rates led some
customers to delay device orders as they seek to temporarily manage
their working capital and capital expenditure.
Software & services revenue increased by 8% year-on-year.
Software & services revenues as a proportion of total revenues
for the year increased slightly to 26% (2021: 24%). However, the
Group continues to focus on growing recurring revenues that
increased by 25% from $12.9m to $16.1m. Overall, recurring software
& services revenue accounts for 67% of total software &
services revenue (2021: 58%). At 30 November 2022, exit run rate
ARR increased to $18.7m (2021: $15.2m). On a constant currency
basis exit run rate ARR at 30 November 2022 would have been
$20.0m.
The software and services gross profit margin has reduced by
4bps compared to the prior year. This decline was due to a
difference in the revenue mix of the 24i business and investment
made in additional resources for customer-onboarding.
The increase in exit run rate ARR provides enhanced revenue
visibility as the Group moves forward. In addition, we report a net
customer revenue retention rate, based on recurring revenue at
constant currency, for the Group of 107% (2021: 117%). The net
revenue retention rate is calculated by reference to recurring
revenue from existing customers, including upsells, less recurring
revenue lost from customer churn during the year. Whilst the
retention rate is still above 100%, which is positive as our
customer subscriber base continues to grow, it is lower than the
prior year due to less upsell revenue from existing customers.
REVENUE AND ADJUSTED EBITDA
Revenue Adjusted EBITDA
-------------------------- ------------------
2022 2021 2022 2021
$m $m $m $m
-------------- ------ ------------------ -------- --------
24i 19.1 17.8 0.7 1.2
Amino 72.0 75.1 15.8 19.7
Central costs - - (1.9) (2.5)
-------------- ------ ------------------ -------- --------
Total 91.1 92.9 14.6 18.4
Adjusted EBITDA for the year ended 30 November 2022 was $14.6m
(2021: $18.4m). Adjusted EBITDA is reconciled below, and is
calculated as operating profit before depreciation, interest, tax,
amortisation, impairment of goodwill, exceptional items and
employee share-based payment charges. This is consistent with the
way the financial performance of the Group is presented to the
Board. 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
2022 2021
$m $m
--------------------------------------- ------- -------
Software & services 19.1 17.4
Devices including integrated software - 0.4
Revenue 19.1 17.8
Adjusted cost of sales (5.1) (3.8)
--------------------------------------- ------- -------
Adjusted gross margin 14.0 14.0
Adjusted gross margin % 73% 79%
Adjusted operating costs (13.4) (12.8)
--------------------------------------- ------- -------
Adjusted EBITDA 0.7 1.2
Adjusted EBITDA % 3% 7%
Capitalised development costs 5.8 5.8
--------------------------------------- ------- -------
Revenue in the 24i segment increased by 7% to $19.1m (2021:
$17.8m). This is due to a shift in focus during the year towards
driving recurring software revenue. This change has resulted in the
growth of exit run rate ARR from $11.1m to $14.3m, which represents
29% year-on-year growth (40% on a constant currency basis). The
increased focus on exit run rate ARR aligns with the Group's
software-led strategy.
The gross profit margin for the 24i segment has reduced by 6%
compared to the prior year. This was, in part, due to the
completion in 2021 of a significant high-margin project. In
addition, gross profit margin for 2022 was impacted by investment
made in additional resources for customer-onboarding. We expect
that the gross margin will improve in 2023 as the 24i business
increases in scale.
Furthermore, adjusted operating costs increased by $0.6m during
the period. The majority of this increase results from the cost of
running the Nordija business for a full year following the
acquisition in May 2021. As a result, adjusted EBITDA has reduced
from $1.2m in 2021 to $0.7m in 2022. Following the cost reduction
actions taken in February 2023 as outlined in the CEO report we
expect EBITDA margin to improve in 2023.
AMINO SEGMENT
2022 2021
$m $m
--------------------------------------- ------- -------
Software & services 5.0 5.0
Devices including integrated software 67.0 70.1
Revenue 72.0 75.1
Adjusted cost of sales (44.1) (44.4)
--------------------------------------- ------- -------
Adjusted gross margin 27.9 30.7
Adjusted gross margin % 39% 41%
Adjusted operating costs (12.1) (11.0)
--------------------------------------- ------- -------
Adjusted EBITDA 15.8 19.7
Adjusted EBITDA % 22% 26%
Capitalised development costs 2.0 2.3
--------------------------------------- ------- -------
Device revenues decreased by 4% during the year to $67.0m (2021:
$70.1m). In the first half, volumes shipped were negatively
impacted by delays in the supply chain caused by significantly
increased lead times, lack of availability of components, and
scarcity of shipping capacity caused by the COVID-19 pandemic. In
the second half, the key driver behind the overall 4% decline in
device revenues has come from decreased order volumes as a result
of global economic headwinds resulting in increased interest rates
which have led some customers to delay device orders as they seek
to temporarily reduce working capital and capital expenditure.
The Group has a core customer base in respect of device
revenues, whereby repeat orders are placed by the same customers
over multiple financial years. Taking the last three financial
years, repeat orders from existing customers over that period has
accounted for 93% (2021: 94%) of total device revenue.
Management had forecast a decrease in device sales for FY23 due
to shortened supply chain lead times. Consequently, the assumptions
used in the review of the carrying value of Goodwill relating to
the Amino business have been revised which reflect, on a
probability expected basis, negative impact of both the current
macro-economic uncertainty as well as a more conservative view of
long-term performance and growth rates of streaming devices.
Following these revisions an impairment to the carrying value of
this goodwill of $12.5m has been recorded.
CENTRAL COSTS
2022 2021
$m $m
----------------- ------ ------
Operating costs (1.9) (2.5)
----------------- ------ ------
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. The decrease of $0.6m during
the year is primarily in respect of a reduction to bonuses.
ADJUSTED EBITDA
2022 2021
$m $m
----------------------------------- ------- -------
Revenue 91.1 92.9
Adjusted cost of sales (49.1) (48.2)
----------------------------------- ------- -------
Adjusted gross margin 42.0 44.7
Adjusted gross margin % 46% 48%
Customer support and professional
services (5.3) (6.0)
Research and development (6.0) (5.0)
SG&A (16.1) (15.3)
----------------------------------- ------- -------
Total adjusted operating expenses (27.4) (26.3)
----------------------------------- ------- -------
Adjusted EBITDA 14.6 18.4
----------------------------------- ------- -------
RESEARCH & DEVELOPMENT COSTS
The Group continues to invest in research and in the development
of new products and spent $13.8m on R&D activities (2021:
$13.0m) of which $7.8m was capitalised (2021: $8.0m).
2022 % of revenue 2021 % of
revenue
$m $m
-------------------------------- ------ -------------- ------ ---------
Core engineering expenses 12.2 13% 11.9 13%
Product management 0.7 1% 0.6 1%
R&D senior management 0.9 1% 0.5 1%
-------------------------------- ------ -------------- ------ ---------
Total research and development
expenses 13.8 15% 13.0 14%
-------------------------------- ------ -------------- ------ ---------
Capitalised development costs (7.8) (8.0) -
-------------------------------- ------ -------------- ------ ---------
Net research and development
costs 6.0 5.0 -
-------------------------------- ------ -------------- ------ ---------
The Group's spend on core engineering activities has increased
by $0.3m in the year to $12.2m (2020: $11.9m). The increase of
$0.3m reflects a combination of an increased workforce and salary
inflation, the latter being driven by the Group's continued
investment in software development and related products.
Specifically, the Group has invested in the products that have been
driving ARR such as 24i's video streaming platforms and Amino's
SaaS device management platform.
Selling, general and administrative (SGA) expenses have
increased by 5% in the year to $16.1m (2021: $15.3m).
A reconciliation of adjusted EBITDA to operating profit is
provided as follows:
2022 2021*
$m $m
------------------------------------------- ------- -------
Adjusted EBITDA 14.6 18.4
Exceptional items:
-- Within cost of sales 0.0 0.2
-- Within operating expenses (6.7) (1.7)
-- Impairment of goodwill (12.5) -
Employee share-based payment charge (0.4) (1.1)
Depreciation and amortisation (11.6) (10.6)
------------------------------------------- ------- -------
Operating profit (16.6) 5.2
------------------------------------------- ------- -------
EXCEPTIONAL ITEMS
Exceptional items within cost of sales in 2022 comprised a
$0.05m credit (2021: $0.2m credit) in respect of royalty costs
recognised in prior years which have subsequently been
renegotiated.
Exceptional items included within operating expenses in 2022
comprised:
-- $5.2m (2021: $0.4m) one off costs relating to diligence costs
in respect of the aborted material acquisition
-- $0.4m (2021: $0.6m) one-off costs in respect of acquisitions and legal costs; and
-- $1.1m (2021: $0.3m) post-acquisition integrations and associated restructuring costs
-- $12.5m (2021: $nil) goodwill impairment charge
DEPRECIATION AND AMORTISATION
Excluding amortisation of intangibles recognised on acquisition,
depreciation and amortisation was $7.0m (2021: $6.7m).
Amortisation of intangibles recognised on acquisition was $4.6m
(2021: $4.0m), which represents an increase of $0.6m. The increase
of $0.6m in the year primarily relates to the amortisation of the
acquired intangibles from the Nordija acquisition during the prior
year and The Filter during the current year.
TAXATION
The tax charge of $0.5m (2021: $0.6m credit) comprised:
-- $2.0m (2021: $2.8m) current tax charge; offset by
-- $0.8m release (2021: $0.1m) of an uncertain tax provision
held in respect of the use of tax losses in the USA; and
-- $0.7m (2021: $3.4m) credit relating to the unwind of deferred
tax assets and liabilities recognised on acquisitions in the
current and prior years.
Loss after tax was $17.4m (2021: $5.4m profit).
CASH FLOW
A reconciliation of adjusted operating cash flow before tax to
cash generated from operations before tax is provided as
follows:
2022 2021
$m $m
----------------------------------------------------------- ------ ------
Adjusted operating cash flow before tax 8.9 16.7
Post-acquisition remuneration in respect of the
acquisition of 24i Unit Media BV - (1.3)
Post-acquisition integration and associated restructuring
costs (1.5) (0.3)
Acquisition and one-off legal costs(1) (1.0) (1.0)
Cash generated from operations before tax 6.4 14.1
----------------------------------------------------------- ------ ------
Adjusted cash flow from operations was $8.9m (2021: $16.7m) and
represented 61% of adjusted EBITDA (2021: 91%). The reduction in
adjusted cash flow from operations and the conversion from adjusted
EBITDA was due to a cash outflow from working capital(1) of $5.6m
(2021: $2.4m cash outflow). Whilst the Group continues to generate
good operating cash flows, navigating the well-known supply chain
issues in the year was challenging and resulted in an additional
$6.7m investment in inventory in the year to mitigate potential
supply chain delays.
Exceptional cash flows in 2022 comprised one-off costs of $2.5m
(2021: $2.6m) including $1.0m (2021: $0.3m) post-acquisition
integrations and associated restructuring costs, and $1.0m one off
costs associated with the aborted material acquisition paid by the
Group(1) . Including these exceptional cash outflows cash generated
from operations before tax was $6.4m (2021: $14.1m).
During the year the Group spent $0.2m (2021: $0.3m) on capital
expenditure in respect of tangible fixed assets and capitalised
$7.8m (2021: $8.0m) of research and development costs and software
licenses. The acquisition of The Filter included initial cash
consideration of $1.5m.
The Group paid dividends of $3.3m (2021: $3.1m) during the
financial year, relating to 2021 ($2.3m) and 2022 interim
($1.0m).
Notes
(1) Cash outflow from working capital excludes the impact of a
$4.1m increase in payables for the aborted acquisition costs
to be settled in Q1 FY23.
The Group generated adjusted free cash outflow of $3.0m (2021:
$3.8m cash inflow) in the year and a reconciliation is provided
below:
2022 2021
$m $m
------------------------------------------- ------ ------
Adjusted operating cash flow before tax 8.9 16.7
Corporation tax paid (2.4) (3.2)
Purchases of intangible assets (7.6) (8.0)
Purchase of property, plant and equipment (0.2) (0.3)
Net interest paid (0.7) (0.1)
Lease payments (1.1) (1.3)
Adjusted free cash flow (3.0) 3.8
------------------------------------------- ------ ------
The decrease in the year of $6.8m can be attributable to the
increase of $6.7m relating to the investment in inventory in the
year to mitigate potential supply chain delays, that has been
described above.
FINANCIAL POSITION
The Group had net cash of $4.0m at 30 November 2022 (2021:
$14.2m). The Group has a banking facility with Barclays Bank plc,
Silicon Valley Bank, and Bank of Ireland of which the Group had
drawn $7.5m at 30 November 2022. This facility of $50m, split
evenly across the new three bank club, also includes a further up
to $50m available by way of an accordion which is designated for
M&A activity. The facility has a committed term to 23 December
2024 with options to extend by a further one or two years. The
facility includes financial covenants whereby the banking facility
may be restricted as a result of not meeting certain financial
metrics.
At 30 November 2022 the Group had equity of $78.9m (2021:
$104.0m) and net current liabilities of $1.4m (2021: net current
assets of $9.2m).
Goodwill has reduced by $13.2m to $56.3m (2021: $69.5m),
reflecting the $12.5m impairment charge on Amino software and
devices CGU (formerly Entone, Inc) together with foreign exchange
translation movements. Management had forecast a decrease in device
sales for part of FY23 due to shortened supply chain lead times.
Consequently, the assumptions used in the review of the carrying
value of Goodwill relating to the Amino business have been revised,
which reflect the expected, based on a probability expected basis,
negative impact of both the current macro-economic uncertainty as
well as a more conservative view of long-term performance and
growth rates of streaming devices.
GOING CONCERN
These financial statements have been prepared on the going
concern basis. The Directors have reviewed the Group's going
concern position taking account of its current business activities
and their future forecast performance. The factors likely to affect
its expected future financial performance is set out in this
document and include the Group's objectives, policies and processes
for managing its capital, its financial risk management objectives
and its exposure to credit and liquidity risks.
The directors have prepared a base case cash flow forecast
covering a period of at least 12 months from the date of approval
of the financial statements. In addition, they have prepared
various sensitised analyses. These reflect a variety of possible
cash flow scenarios where the Group achieves further reduced
revenues, reduction in gross margins and combinations of both,
together, if required, with the timely deployment of cost
containment and reduction measures that are aligned with the
anticipated levels of performance. Overall, if the base case
forecast is achieved, the Group and parent company will be able to
operate within its existing working capital facilities. However,
the recovery of the Amino division revenues, continued growth in
24i division revenues and cash conversion expected in H2 2023 are
key assumptions. Failure to achieve the base case view of forecast
sales pipeline conversion assumed in the base case forecast could
result in the Group failing to comply with financial covenants
associated with its existing banking facility, potentially
resulting in the facilities being withdrawn.
We are currently in active discussions with the Group's existing
loan facility providers to seek solutions in order to increase the
safety headroom based on the current covenant definitions. Should
those not be successful we may need to seek additional funding
through a placement of shares or other sources of funding which
have not yet been secured. The Group has a history of successfully
negotiating covenant revision, and raising financing.
Taking account of these matters, the Directors have concluded
that the circumstances set forth above indicates the existence of
material uncertainty that may cast significant doubt on the Group's
ability to continue as a going concern. However, given the Group's
current performance, the Directors have considered it is
appropriate to prepare the financial statements on a going concern
basis and the financial statements do not include the adjustments
that would be required if the Group were unable to continue as a
going concern.
DIVID
In August 2022, the Company paid an interim dividend of 1.0
pence (1.26 US cents*) per share in respect of the year ended 30
November 2022. The Board is not proposing a final dividend (2021:
2.09 pence / 2.87 US cents*). This would represent a total dividend
for the year of 1.00 GBP pence (1.26 US cents) per share (2021:
3.09 pence / 4.26 US cents) and is 19% of adjusted earnings per
share.
* Average FX rate for the year was GBP1 : $1.26 (2021: GBP1 :
$1.38).
Mark Carlisle
Chief Financial Officer
15 May 2023
Aferian plc
Consolidated income statement
For the year ended 30 November 2022
Year to 30 Year to 30
November 2022 November 2021*
Notes $000s $000s
--------------------------------------- ------- --------------------------------- ------------------------------
Revenue 91,127 92,890
Cost of sales 3 (49,121) (47,996)
--------------------------------------- ------- --------------------------------- ------------------------------
Gross profit 42,006 44,894
--------------------------------------- ------- --------------------------------- ------------------------------
Operating expenses (58,603) (39,714)
Operating (loss)/profit (16,597) 5,180
--------------------------------------- ------- --------------------------------- ------------------------------
Adjusted operating profit 7,522 11,759
Share-based payment charge (407) (1,079)
Impairment of goodwill (12,488) -
Exceptional items (6,662) (1,505)
Amortisation of acquired intangible
assets 4 (4,562) (3,995)
------- --------------------------------- ------------------------------
Operating (loss)/profit (16,597) 5,180
--------------------------------------- ------- --------------------------------- ------------------------------
Finance expense (313) (688)
Finance income - 290
--------------------------------------- ------- --------------------------------- ------------------------------
Net finance expense (313) (398)
--------------------------------------- ------- --------------------------------- ------------------------------
(Loss)/profit before tax (16,910) 4,782
Tax (charge)/credit (512) 582
--------------------------------------- ------- --------------------------------- ------------------------------
(Loss)/profit after tax (17,422) 5,364
--------------------------------------- ------- --------------------------------- ------------------------------
(Loss)/profit for the year from
continuing operations attributable
to equity holders (17,422) 5,652
Non-controlling interest - (288)
--------------------------------------- ------- --------------------------------- ------------------------------
(Loss)/profit for the year (17,422) 5,364
--------------------------------------- ------- --------------------------------- ------------------------------
Earnings per share
Basic earnings per 1p ordinary
share 5 (20.48c) 7.03c
Diluted earnings per 1p ordinary
share 5 (20.48c) 6.89c
--------------------------------------- ------- --------------------------------- ------------------------------
* See Note 9 regarding finalisation of the 2022 acquisition fair
value in accordance with IFRS 3.
All amounts relate to continuing activities.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Aferian plc
Consolidated statement of comprehensive income
For the year ended 30 November 2022
Year to Year to 30
30 November November 2021*
2022
Notes $000s $000s
--------------------------------------------- -------- ------------- ----------------------------
(Loss)/profit for the financial year (17,422) 5,364
------------------------------------------------------- ------------- ----------------------------
Items that may be reclassified subsequently
to profit or loss:
Net foreign exchange (loss) arising
on consolidation (5,334) (3,112)
------------------------------------------------------- ------------- ----------------------------
Other comprehensive (expense) (5,334) (3,112)
------------------------------------------------------- ------------- ----------------------------
Total comprehensive (expenses)/
income for the year (22,756) 2,252
------------------------------------------------------- ------------- ----------------------------
Non-controlling interest - 288
------------------------------------------------------- ------------- ----------------------------
Total comprehensive (expenses)/
income for the financial year attributable
to equity holders (22,756) 2,540
------------------------------------------------------- ------------- ----------------------------
* See Note 9 regarding finalisation of the 2022 acquisition fair
value in accordance with IFRS 3.
Aferian plc
Consolidated statement of financial position as at 30 November
2022
As at 30 November
As at 30 November
2022 2021*
Assets Notes $000s $000s
------------------------------------ ------- ------------------- ------------------
Non-current assets
Property, plant and equipment 496 630
Right of use assets 2,276 1,910
Intangible assets 6 81,021 95,864
Trade and other receivables 7 183 235
------------------------------------ ------- ------------------- ------------------
83,976 98,639
------------------------------------ ------- ------------------- ------------------
Current assets
Inventories 9,222 2,557
Trade and other receivables 19,846 21,936
Corporation tax receivable 654 113
Cash and cash equivalents 7 11,524 14,182
------------------------------------ ------- ------------------- ------------------
41,246 38,788
------------------------------------ ------- ------------------- ------------------
Total assets 125,222 137,427
------------------------------------ ------- ------------------- ------------------
Capital and reserves attributable
to equity holders of the Company
Called-up share capital 1,488 1,484
Share premium 39,768 39,249
Capital redemption reserve 12 12
Foreign exchange reserve (8,722) (3,388)
Merger reserve 42,750 42,750
Retained earnings 3,587 23,857
------------------------------------ ------- ------------------- ------------------
Equity attributable to owners
of the parent 78,883 103,964
------------------------------------ ------- ------------------- ------------------
Liabilities
Current liabilities
Trade and other payables 33,534 27,777
Lease liabilities 1,121 1,002
Corporation tax payable 505 774
Loans and borrowings 8 7,531 35
------------------------------------ ------- ------------------- ------------------
42,691 29,588
------------------------------------ ------- ------------------- ------------------
Non-current liabilities
Trade and other payables 1,070 677
Lease liabilities 1,177 966
Provisions 288 1,163
Deferred tax liabilities 8 1,113 1,069
------------------------------------ ------- ------------------- ------------------
3,648 3,875
------------------------------------ ------- ------------------- ------------------
Total liabilities 46,339 33,463
------------------------------------ ------- ------------------- ------------------
Total equity and liabilities 125,222 137,427
------------------------------------ ------- ------------------- ------------------
* See Note 9 regarding finalisation of the 2022 acquisition fair
value in accordance with IFRS 3.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Aferian plc
Consolidated statement of cash flows
For the year ended 30 November 2021
Year to Year to 30
30 November November
2022 2021
Notes $000s $000s
---------------------------------------------- --------- ------------- -----------
Cash flows from operating activities
Cash generated from operations 10 6,389 14,113
Corporation tax paid (2,360) (3,241)
---------------------------------------------- --------- ------------- -----------
Net cash generated from operating activities 4,029 10,872
---------------------------------------------- --------- ------------- -----------
Cash flows from investing activities
Purchases of intangible assets (7,635) (8,035)
Purchases of property, plant and equipment (172) (329)
Interest received - -
Purchase of non-controlling interest - (1,180)
Acquisition of subsidiaries net of cash
acquired 9 (1,545) (4,749)
---------------------------------------------- --------- ------------- -----------
Net cash used in investing activities (9,352) (14,293)
---------------------------------------------- --------- ------------- -----------
Cash flows from financing activities
Proceeds from exercise of employee share
options - 206
Proceeds from issue of new shares 523 12,723
Lease payments (1,104) (1,341)
Dividends paid (3,256) (3,118)
Interest paid (677) (131)
Repayment of borrowings - (6,887)
Proceeds borrowings 7,500 6,887
---------------------------------------------- --------- ------------- -----------
Net cash generated from financing activities 2,986 8,339
---------------------------------------------- --------- ------------- -----------
Net (decrease)/increase in cash and
cash equivalents (2,336) 4,918
Cash and cash equivalents at beginning
of year 14,182 9,476
Effects of exchange rate fluctuations
on cash held (322) (212)
---------------------------------------------- --------- ------------- -----------
Cash and cash equivalents at end of
year 11,524 14,182
---------------------------------------------- --------- ------------- -----------
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Aferian plc
Consolidated statement of changes in equity
For the year ended 30 November 2022
Total
Foreign Capital Profit attributable
Share Share Merger Other exchange redemption and to owners Non-controlling Total
capital premium reserve reserve reserve reserve loss of parent interest Equity
Notes $000s $000s $000s $000s $000s $000s $000s $000s $000s $000s
Shareholders' equity at
30 November 2020 1,367 35,907 30,122 (2,794) (276) 12 23,475 87,813 195 88,008
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Profit for the year* - - - - - - 5,652 5,652 (288) 5,364
Other comprehensive expense - - - - (3,112) - - (3,112) - (3,112)
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Total comprehensive income
for the year* attributable
to equity holders - - - - (3,112) - 5,652 2,540 (288) 2,252
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Share based payment charge - - - - - - 529 529 - 529
Exercise of employee share
options - - - - - - 206 206 - 206
Dividends paid - - - - - - (3,118) (3,118) - (3,118)
Transfer of non-controlling
interest & put option reserve
on acquisition - - - 2,794 - - (2,887) (93) 93 -
Issue of share capital,
net of issue costs
117 3,342 12,628 - - - - 16,087 - 16,087
---------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Total transactions with
owners 117 3,342 12,628 2,794 - - (5,270) 13,611 93 13,704
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Total movement in shareholders'
equity 117 3,342 12,628 2,794 (3,112) - 382 16,151 (195) 15,956
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Shareholders' equity at
30 November 2021* 1,484 39,249 42,750 - (3,388) 12 23,857 103,964 - 103,964
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
(Loss) for the year - - - - - - (17,422) (17,422) - (17,422)
Other comprehensive expense - - - - (5,334) - - (5,334) - (5,334)
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Total comprehensive (expenses)
for the year attributable
to equity holders - - - - (5,334) - (17,422) (22,756) - (22,756)
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Share based payment charge - - - - - 408 408 - 408
Dividends paid - - - - - - (3,256) (3,256) - (3,256)
Issue of share capital,
net of issue costs - 519 - - - - - 523 - 523
4 -
---------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Total transactions with
owners 4 519 - - - - (2,848) (2,325) - (2,325)
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Total movement in shareholders'
equity 4 519 - - (5,334) - (20,270) (25,081) - (25,081)
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Shareholders' equity at
30 November 2022 1,488 39,768 42,750 - (8,722) 12 3,587 78,883 - 78,883
----------------------------------------- -------- -------- --------- -------- ---------- ----------- ---------- ------------- ---------------- ----------
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
1 Basis of preparation
The financial information set out in this document does not
constitute the Group's Annual Report (which includes the statutory
financial statements) for the years ended 30 November 2021 or 2020.
The Annual Report (which includes the statutory financial
statements) for the years ended 30 November 2021 ('2021') and 30
November 2022 ('2022'), which were approved by the directors on 15
May 2023, have been reported on by the Independent Auditors. The
Independent Auditors' Reports on the statutory financial statements
for each of 2021 and 2022 were unqualified, did for 2022 draw
attention to a matter by way of emphasis, being going concern (but
for 2021, did not draw attention to any matters by way of
emphasis), and did not contain a statement under 498(2) or 498(3)
of the Companies Act 2006.
The Group's Annual Report (which includes the statutory
financial statements) for the year ended 30 November 2021 have been
filed with the Registrar of Companies. The Annual Report (which
includes the statutory financial statements) for the year ended 30
November 2022 will be delivered to the Registrar in due course, and
will be available from the Parent Company's registered office at
Botanic House, 100 Hills Road, Cambridge, England, CB2 1PH and on
the Group's website https://aferian.com/investors/
The financial information set out in these results has been
prepared using the recognition and measurement principles of and in
accordance with UK adopted International Accounting Standards
('IFRS'). The accounting policies adopted in these results have
been consistently applied to all the years presented and are
consistent with the policies used in the preparation of the
financial statements for the year ended 30 November 2021, except
for those that relate to new standards and interpretations
effective for the first time for periods beginning on (or after) 1
January 2021. There are deemed to be no new standards, amendments,
and interpretations to existing standards, which have been adopted
by the Group that have had a material impact on the financial
statements.
2 Going Concern
The 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 Group had cash resources of $11.5m as at 30 November 2022
(2021: $14.2m) and a multicurrency working capital facility of
$50.0m, of which $7.5m was drawn at 30 November 2022 (2021: $nil).
On 30 December 2022 the Group executed an amendment letter to
update the covenant definition in the existing banking facility
with Barclays Bank plc, Silicon Valley Bank, and Bank of Ireland
secured on 23 December 2021. As part of the amended covenant
definition, the amount of available facility is subject to a cap of
2.5 times the amount of 12 months rolling Adjusted Lender EBITDA,
tested on a monthly basis. The facility has a committed term to 23
December 2024 with options to extend by a further one or two years.
The Group had net current liabilities of $1.2m as at 30 November
2022 (2021: net current assets of $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 Amino division revenue continues to
experience a negative impact from the current macroeconomic
environment. In respect of this going concern assessment, The
Directors have considered the following principal risks and
uncertainties that could potentially impact the Group's ability to
fund its future activities, meet its liabilities as they fall due
and adhere to its future banking covenants, including:
-- A decline in market conditions resulting in lower than
forecast sales; and
-- Higher working capital requirement
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
2 Going Concern (continued )
The directors have prepared a base case cash flow forecast
covering a period of at least 12 months from the date of approval
of the financial statements. In addition, they have prepared
various sensitised analyses. These reflect a variety of possible
cash flow scenarios where the Group achieves further reduced
revenues, reduction in gross margins and combinations of both,
together, if required, with the timely deployment of cost
containment and reduction measures that are aligned with the
anticipated levels of performance. Overall, if the base case
forecast is achieved, the Group and parent company will be able to
operate within its existing working capital facilities. However,
the recovery of the Amino division revenues, continued growth in
24i division revenues and cash conversion expected in H2 2023 are
key. Failure to achieve the base case view of forecast sales
pipeline conversion assumed in the base case forecast could result
in the Group failing to comply with financial covenants associated
with its existing banking facility, potentially resulting in the
facilities being withdrawn.
We are currently in active discussions with the Group's existing
loan facility providers to seek solutions in order to increase the
safety headroom based on the current covenant definitions. Should
those not be successful we may need to seek additional funding
through a placement of shares or other sources of funding which
have not yet been secured. The Group has a history of successfully
negotiating covenant revision, and raising financing.
Taking account of these matters, the Directors have concluded
that the circumstances set forth above indicates the existence of
material uncertainty that may cast significant doubt on the Group's
ability to continue as a going concern. However, given the Group's
current performance, the Directors have considered it is
appropriate to prepare the financial statements on a going concern
basis and the financial statements do not include the adjustments
that would be required if the Group were unable to continue as a
going concern.
3 Geographical external customer revenue analysis
For this disclosure revenue is determined by the location of the
customer.
Year to 30 November 2022 Year to 30 November 2021
Amino 24i Total Amino 24i Total
$000s $000s $000s $000s $000s $000s
------------------- ------------ ---------- ----------- -------- -------- ---------
USA 29,389 5,809 35,198 34,584 5,225 39,809
------------------- ------------ ---------- ----------- -------- -------- ---------
Latin America 6,217 1,254 7,471 8,117 986 9,103
------------------- ------------ ---------- ----------- -------- -------- ---------
Netherlands 23,354 6,502 29,856 21,167 6,879 28,046
Rest of EMEA 10,462 5,542 16,005 8,432 4,708 13,140
------------------- ------------ ---------- ----------- -------- -------- ---------
EMEA 33,816 12,044 45,860 29,599 11,587 41,186
------------------- ------------ ---------- ----------- -------- -------- ---------
Rest of the World 2,598 2,598 2,792 - 2,792
------------------- ------------ ---------- ----------- -------- -------- ---------
72,020 19,107 91,127 75,092 17,798 92,890
------------------- ------------ ---------- ----------- -------- -------- ---------
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
4 Exceptional items
Exceptional items within cost of sales and operating costs
comprise the following charges/(credits):
Year to Year to
30 November 30 November
2022 2021
$000s $000s
-------------------------------------------------- ------------- -------------
Credit relating to royalty costs recognised
in prior years and subsequently renegotiated (48) (163)
-------------------------------------------------- ------------- -------------
Subtotal cost of sales (48) (163)
-------------------------------------------------- ------------- -------------
Expensed contingent post-acquisition remuneration
in respect of the acquisition of 24i Unit
Media BV
Redundancy and associated costs - 347
1,072 304
Acquisition and one-off legal costs
Aborted acquisition costs 432 638
5,206 379
-------------------------------------------------- ------------- -------------
Subtotal operating expenses 6,710 1,668
-------------------------------------------------- ------------- -------------
Total exceptional items 6,662 1,505
-------------------------------------------------- ------------- -------------
Other exceptional items
-------------------------------------------------- ------------- -------------
Goodwill impairment charge 12,488 -
-------------------------------------------------- ------------- -------------
Exceptional items within net finance expense comprise the
following (credits)/charges:
Year to Year to
30 November 30 November
2022 2021
$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
Unwinding discount on contingent consideration
regarding FokusOnTV (formerly Nordija) acquisition - 532
(403) 79
----------------------------------------------------- ------------- -------------
Subtotal finance expense (403) 611
----------------------------------------------------- ------------- -------------
Total net finance (income)/expense - exceptional
items (403) 432
----------------------------------------------------- ------------- -------------
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
5 Earnings per share
Year to Year to
30 November 30 November
2022 2021
$000s $000s
---------------------------------------------------- ------------- -------------
(Loss)/profit attributable to ordinary shareholders (17,422) 5,652
---------------------------------------------------- ------------- -------------
Exceptional items 6,662 1,505
Impairment of goodwill 12,488 -
Share-based payment charges 407 1,079
Finance income (403) (179)
Finance expense - 611
Amortisation of acquired intangible assets 4,562 3,995
Deferred tax credit on acquired intangibles (682) (734)
Deferred tax credit on tax losses recognised - (2,721)
---------------------------------------------------- ------------- -------------
(Loss)/ profit attributable to ordinary
shareholders excluding adjusting items 5,612 9,208
---------------------------------------------------- ------------- -------------
Weighted average number of shares (Basic) 85,070,688 80,385,687
---------------------------------------------------- ------------- -------------
Dilutive share options outstanding 1,545,606 1,613,485
---------------------------------------------------- ------------- -------------
Weighted average number of shares (Diluted) 86,616,294 81,999,172
---------------------------------------------------- ------------- -------------
Basic earnings per ordinary share of 1p (20.48)c 7.03c
---------------------------------------------------- ------------- -------------
Diluted earnings per ordinary share of 1p (20.48)c 6.89c
---------------------------------------------------- ------------- -------------
Adjusted basic earnings per ordinary share
of 1p 6.6c 11.45c
---------------------------------------------------- ------------- -------------
Adjusted diluted earnings per ordinary share
of 1p 6.48c 11.23c
---------------------------------------------------- ------------- -------------
The calculation of basic earnings per share is based on profit
after taxation and the weighted average of ordinary shares of 1p
each in issue during the year. The Company holds 1,482,502 (2021:
1,531,458) 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 (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 exercise price of
the Company's ordinary shares.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
6 Intangible assets
Customer Trade Intellectual Software Development Acquired
Goodwill* relationships names Property licences costs platforms Total
$000s $000s $000s $000s $000s $000s $000s $000s
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
Cost
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2020 68,237 20,810 2,557 390 1,639 41,194 13,917 148,744
Additions - - - - - 8,035 - 8,035
Acquisition of subsidiary 2,950 1,000 - - - - 3,888 7,838
Foreign exchange
adjustment (1,660) (686) (69) - 2 (458) (650) (3,521)
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2021 69,527 21,124 2,488 390 1,641 48,771 17,155 161,096
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
Additions - - - - - 7,636 - 7,636
Acquisition of subsidiary
Impairment 1,586 119 - - - - 2,609 4,314
Foreign exchange adjustment (12,488) - - - - - - (12,488)
(2,333) (931) (94) - (160) (1,220) (1,123) (5,861)
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2022 56,292 20,312 2,394 390 1,481 55,187 18,641 154,697
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
Amortisation
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2020 - 7,711 1,776 390 1,606 34,429 10,765 56,677
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
Charge for the year - 2,403 89 - 31 5,036 1,503 9,062
Foreign exchange
adjustment - (48) (22) - 1 (142) (296) (507)
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2021 - 10,066 1,843 390 1,638 39,323 11,972 65,232
Charge for the year - 2,011 80 - 3 5,363 2,471 9,928
Foreign exchange
adjustment - (217) (43) - (160) (510) (554) (1,484)
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2022 - 11,860 1,880 390 1,481 44,176 13,889 73,676
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
Net book amount
At 30 November 2022 56,292 8,452 514 - - 11,011 4,752 81,021
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
At 30 November 2021 69,527 11,008 645 - 3 9,448 5,233 95,864
----------------------------- ---------- ------------- ------ ------------ -------- ----------- --------- ----------
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
7 Trade and other receivables
As at As at
30 November 2022 30 November
2021
$000s $000s
---------------------------------------------- ------------------ -------------
Current assets:
Trade receivables 17,273 19,575
Less: provision against trade receivables (646) (306)
---------------------------------------------- ------------------ -------------
Trade receivables (net) 16,627 19,269
Contract assets 1,191 1,527
---------------------------------------------- ------------------ -------------
Total financial assets other than cash
and cash equivalents classified as amortised
cost 17,818 20,796
---------------------------------------------- ------------------ -------------
Other receivables 400 601
Prepayments 1,628 539
---------------------------------------------- ------------------ -------------
Total trade and other receivables 19,846 21,936
Corporation tax receivable 654 113
---------------------------------------------- ------------------ -------------
Current assets: due within one year 20,500 22,049
---------------------------------------------- ------------------ -------------
Non-current assets:
Other receivables 183 235
---------------------------------------------- ------------------ -------------
Other receivables due in more than one year comprise rent
deposits. The carrying value of trade and other receivables
classified at amortised cost approximates fair value. The Group
does not hold any collateral as security.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
8 Trade and other payables
As at As at
30 November 30 November
2022 2021
$000s $000s
----------------------------------------------- ------------- -------------
Current liabilities
Trade payables 23,268 14,420
Other payables 111 233
Accruals 6,759 7,909
----------------------------------------------- ------------- -------------
Total current financial liabilities, excluding 30,138 22,562
loans and borrowings, classified as financial
liabilities measured at amortised cost
Contingent consideration 809 1,117
----------------------------------------------- ------------- -------------
Total current financial liabilities measured
at fair value 809 1,117
Social security and other taxes 301 1,837
Contract liabilities 2,286 2,261
----------------------------------------------- ------------- -------------
Total trade and other payables 33,534 27,777
Lease liabilities 1,121 966
Corporation tax payable 505 774
----------------------------------------------- ------------- -------------
35,160 29,517
----------------------------------------------- ------------- -------------
Non-current liabilities
Other payables 1,070 677
Lease liabilities 1,177 1.002
----------------------------------------------- ------------- -------------
2,247 1,679
----------------------------------------------- ------------- -------------
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary
On 4 April 2022, the Group acquired 100% of the issued share
capital of Exabre Limited (trading as 24iQ (formerly 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
Group's objective to acquire key and emerging technologies that add
value to its platform's capabilities. The acquisition was completed
in British Pound.
The preliminary amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are set out in
the table below.
Book value Fair value adjustment Fair value
$000 $000 $000
-------------------------------------------------- ----------- ---------------------- -----------
Identifiable intangible
assets - 2,728 2,728
Right of use assets 69 - 69
Property, plant and equipment 3 - 3
Current assets
* Current trade and other receivables 320 - 320
* Cash and cash equivalents 4 - 4
Liabilities
* Current trade and other payables (259) - (259)
* Lease liability (69) - (69)
* Deferred tax liability - (682) (682)
-------------------------------------------------- ----------- ---------------------- -----------
Total identifiable assets
and liabilities 68 2,046 2,114
Goodwill 1,586
-------------------------------------------------- ----------- ---------------------- -----------
Total consideration 3,700
-------------------------------------------------- ----------- ---------------------- -----------
Total gross consideration 4,206
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary (continued)
Satisfied by: Fair value
$000
----------------------------------------------- -----------
Initial consideration:
* Cash 1,549
Deferred consideration:
* Cash 327
Contingent consideration:
* Payable in cash 2,330
------------------------------------------------ -----------
Total gross consideration 4,206
Impact of discounting deferred and contingent
consideration (506)
Total consideration 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 $0.5m 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.
At the acquisition date, the estimated fair value of the contingent
consideration was $1.8m based on the ARR forecasts. Management has
re-assessed the fair value of the contingent consideration as at
the balance sheet to be $1.3m. The reduction in the liability of
$0.5m has been recognised in the consolidated income statement as
finance income.
The costs of the acquisition were $0.2m. 24iQ (formerly the
Filter) contributed $0.4m to revenue and $0.2m loss to the Group's
operating profit for the year since the acquisition date. If the
acquisition of 24iQ (formerly the Filter) had been completed on the
first day of the financial year, Group revenues for the year would
have been $91.3m and operating loss would have been $4.0m.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary (continued)
Acquisition in the prior period - FokusOnTV (formerly
Nordija)
On 27 May 2021, the Group acquired 100% of the issued share
capital of FokusOnTV (formerly Nordija, 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 has retrospectively
adjusted 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. 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 table below.
Fair value Adjustment
adjustment to initial
Book as previously estimated Fair value
value reported fair value $000
$000 $000 $000
-------------------------------------------------- -------- --------------- ------------ ------------
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 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
-------------------------------------------------- -------- --------------- ------------ ------------
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary (continued)
The contract asset of $0.6m has been 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
has been released in the consolidated income statement for the year
ended 30 November 2021.
Satisfied by: Fair value
$000
------------------------------------------------------------ -----------
Initial consideration:
* Cash 5,018
659
* Equity instruments (315,511 ordinary shares of
Aferian plc)
Contingent consideration:
* Cash 144
610
* Equity instruments (292,030 ordinary shares of
Aferian plc)
------------------------------------------------------------ -----------
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 includes 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.
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.
Contingent consideration
During the year, all targets associated with the contingent
consideration payment were successfully satisfied in full.
Accordingly, the following payments and issue of equity were made
during the year:
-- On 31 March 2022, the Group paid an amount of EUR0.5m
($0.6m), of which EUR0.1m ($0.1m) was settled in cash and the
remaining EUR0.4m ($0.5m) through the issue of 222,430 new ordinary
shares of 1p each in the capital of the Company.
-- On 17 October 2022, the Group paid the remaining amount due
of EUR0.1m ($0.1m), of which EUR0.03m ($0.03m) was settled in cash
and the remaining EUR0.07m ($0.07m) through the issue of 52,769 new
ordinary shares of 1p each in the capital of the Company.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
10 Cash generated from operations
Cash generated from operations Year to Year to
30 November 2022 30 November
2021
$000s $000s
---------------------------------------------------- -------------------- ---------------
(Loss)/profit for the year
Tax charge/(credit)
Net finance costs
Amortisation charge*
Depreciation charge (17,422) 5,364
Goodwill impairment charge 512 (582)
Loss on disposal of property, plant and 313 398
equipment 9,928 9,062
Share based payment charge 1,684 1,611
Exchange differences 12,488 -
(Increase)/decrease in inventories 4 9
Decrease/(increase) in trade and other 407 1,079
receivables (1,451) (249)
Decrease in provisions (6,665) 399
(Decrease)/increase in trade and other 2,283 (6,795)
payables (10) (64)
Increase in payables for aborted acquisition 246 3,881
costs 4,072 -
---------------------------------------------------- -------------------- ---------------
Cash generated from operations 6,389 14,113
---------------------------------------------------- -------------------- ---------------
Year to Year to
30 November 2022 30 November
2021
$000s $000s
---------------------------------------------- ---------------------- ---------------
(Loss)/profit for the year
Tax charge/(credit)
Net finance costs
Amortisation charge*
Depreciation charge (17,422) 5,364
Goodwill impairment charge 512 (582)
Loss on disposal of property, plant 313 398
and equipment 9,928 9,062
Share based payment charge 1,684 1,611
Exchange differences 12,488 -
(Increase)/decrease in inventories 4 9
Decrease/(increase) in trade and other 407 1,079
receivables (1,451) (249)
Decrease in provisions (6,665) 399
(Decrease)/increase in trade and other 2,283 (6,795)
payables (10) (64)
Increase in payables for aborted acquisition 246 3,881
costs 4,072 -
---------------------------------------------- ---------------------- ---------------
Cash generated from operations 6,389 14,113
---------------------------------------------- ---------------------- ---------------
Adjusted operating cash flow before exceptional cash outflows
was $8,937,000 (2021: $16,672,000).
Year to Year to
30 November 2022 30 November
2021
$000s $000s
------------------------------------------- ------------------ -------------
Adjusted operating cashflow 8,937 16,672
Post-acquisition remuneration in respect
of the acquisition of 24i Unit Media
BV - (1,270)
Redundancy and associated costs
Acquisition and one-off legal costs (1,072) (304)
Aborted acquisition costs (432) (606)
(1,044) (379)
------------------------------------------- ------------------ -------------
Cash generated from operations 6,389 14,113
------------------------------------------- ------------------ -------------
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
11 Cautionary Statement
This document contains certain forward-looking statements
relating to Aferian plc (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.
12 AGM / Annual Report
Pursuant to AIM Rule 20, the Annual Report and Accounts for the
financial year ended 30 November 2022 ("Annual Report") is
available to view on the Group's website: www.aferian.com and will
be posted to shareholders shortly. Aferian will hold its AGM on 31
May 2023 with a further general meeting on meeting on 13 June 2023
where the Annual Report and accounts will be received with related
resolutions to be considered.
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END
FR FIFFIEVIRLIV
(END) Dow Jones Newswires
May 16, 2023 02:00 ET (06:00 GMT)
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