TIDMAFRN
RNS Number : 8728K
Aferian PLC
31 August 2023
AFERIAN PLC
("Aferian", the "Company" or the "Group")
HALF YEAR RESULTS
- Improving quality of Group earnings and enhanced revenue visibility.
- Continued strong demand in 24i division in fast growing video streaming market.
- Amino division refocused on higher quality, higher margin streaming devices.
- Confident in full year outturn with high percentage of
contracted revenue and a well-developed pipeline.
Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions
company, announces its unaudited results for the six months ended
31 May 2023 ("H1 2023"), which demonstrate a performance in line
with the trading update announced on 28 June 2023.
Donald McGarva, Chief Executive Officer of Aferian plc,
said:
"This has been a very busy and challenging half for Aferian. The
restructuring of our cost base in 24i and Amino is generating
significant annualised cost savings and providing a stronger
platform on which to build and grow. Demand in our 24i division has
remained strong as we continue our strategic focus on growing
software and services revenue in the fast-growing video streaming
market.
To align ourselves better with our customers' changings needs,
our Amino business has been refocussed to concentrate on higher
quality, higher margin streaming and device management
opportunities and we have seen good initial customer engagement in
the Pay TV and digital signage markets. We have continued to
progress our strategy to improve the quality of our earnings and
enhance revenue visibility in the first half, against what is for
everyone, a challenging macroeconomic environment. Our higher
margin software and services revenue was up 17% year on year, and
we closed the period with exit run rate ARR up 19%.
Following the successful completion of our $4.0m equity raise in
July, we have the resources to focus on driving forward our
advantage and growth in the video streaming market. With 90% of
revenue contracted for the full year and a well-developed pipeline
of well qualified prospects, we remain confident in the full year
outcome and Aferian's positioning to capitalise on long-term
opportunities in the fast-growing video streaming market."
Financial Key Figures
Periods ended 31 May
US$m unless otherwise stated H1 2023 H1 2022 Change
Unaudited Unaudited
------------------------------------------------ ----------- ----------- -------
Total revenue 23.3 44.5 (48%)
* Devices 9.4 32.5 (71%)
* Software and services 14.0 12.0 17%
Exit run rate Annual Recurring Revenue ("ARR")
(1) 18.8 15.8 19%
Statutory operating loss (8.0) (0.6) N/A
Statutory operating cash flow before tax
- H1 2022 restated(5) (12.3) 4.9 N/A
Statutory basic earnings per share (US cents) (10.20) (1.76) (480%)
------------------------------------------------ ----------- ----------- -------
Adjusted operating (loss)/profit (2) (4.2) 2.4 N/A
Adjusted operating cash flow before tax(4) (7.0) 6.7 N/A
Adjusted basic earnings per share (US cents)
(3) (6.40) 1.50 N/A
------------------------------------------------ ----------- ----------- -------
Net (debt)/cash (12.9) 7.8 N/A
Interim dividend per share (GBP pence) - 1.0 N/A
Notes
1. Exit Annualised Recurring Revenue (ARR) is annual run-rate
recurring revenue as at 31 May 2023.
2. Adjusted operating profit is a non-GAAP measure and excludes
amortisation of acquired intangibles, exceptional items, and
share-based payment charges.
3. Adjusted basic earnings per share is a non-GAAP measure and
excludes amortisation of acquired intangibles, exceptional items,
share-based payment charges and non-recurring finance income and
expense.
4. Adjusted operating cash flow before tax is a non-GAAP measure
and excludes cash paid/received in respect of exceptional
items.
5. H1 2022 restated see note 8.
6. Constant currency basis calculated using the closing FX rate for H1 2022 in both years
Financial Highlights
-- Further momentum demonstrated in improving the quality of earnings
and enhancing Group revenue visibility:
o Higher margin software & services revenue of $14.0m, up 17% year-on-year.
o Recurring revenue of $9.5m, up 16% in H1 2023 compared to H1 2022.
o Exit run rate ARR of $18.8m, up 19% year-on-year (constant currency(6)
basis: 20%).
-- Adjusted operating loss of $4.2m, (H1 2022: profit $2.4m) is due
to the reduction in Amino device revenues.
-- Management actions taken in February and June 2023 have reduced
the Group's annualised cost base, including capital expenditure,
by a total of c$8m.
-- Additional cost reduction actions are underway and expected to be
completed in early September 2023.
-- The Group's inventory balance at 31 May 2023 was $8.6m (30 November
2022: $9.2m).
-- Net debt at 31 May 2023 was $12.9m (31 November 2022: $4.0m net
cash). This is expected to reduce over the remainder of the current
financial year as Amino inventory levels reduce further. The Group
remains in compliance with its loan facilities covenants.
-- Post period end, on 25 July 2022, the Group successfully raised
$4.0m through an equity placing to be used for general working capital.
This replaced the need for further drawdown of the Group's existing
shareholder loan facility (currently GBP1.25m) from Kestrel. The
undrawn element GBP2.125m expired on 31 July 2023.
-- No interim dividend payment (H1 2022: 1.0 pence / 1.26 US cents).
Strategic & Operational Highlights
-- 24i - focussed on streaming video experiences.
o 24i continues to win new customers and grow recurring revenue
driven by continued strong demand for streaming video solutions.
The division is prioritising profitability and cash generation
over nominal growth.
o The business launched two significant platform enhancements
in March 2023:
-- 24i Broadcaster Studio, a new pre-packaged solution targeting
broadcasters who go direct-to-consumer with streaming
apps as part of a wider strategy to capitalise on growth
in ad-funded streaming.
-- Three new tiered packages of 24iQ, our data-driven SaaS
personalisation platform, enabling customers of all sizes
to drive greater engagement and end user churn.
o Partnership with global Free Ad-supported Streaming TV ('FAST')
experts, Amagi, announced in March 2023, is already delivering
results with the first joint Amagi and 24i customers launching
their 24i-based streaming apps post period end.
-- Amino - connecting Pay TV to streaming services.
o The poor trading conditions at Amino caused by customer de-stocking
at a time of rising interest rates has also resulted in a higher
than planned inventory balance of $8.6m as at 31 May 2023. The
Amino inventory balance is expected to reduce back towards November
FY21 levels (which were $2.6m) in H1 2024.
o We have refocused the division on higher quality, higher margin
Pay TV and digital signage streaming devices incorporating the
Group's software and Amino's SaaS device management platform.
o Digital signage devices were deployed into a number of international
airports in India during the period.
o Sports betting brand, Paddy Power, is now using Amino digital
signage devices throughout its shops in the UK and Ireland to
improve the customer experience and reduce costs.
Current Trading and Outlook
Trading remains in line with the trading and outlook
communicated in our trading statement on 28 June 2023. For the full
year ending 30 November 2023, 91% of expected revenues are
contracted. The remaining 9% is covered by a well-developed sales
pipeline. Combined with the cost reduction actions taken above,
this provides the Board with confidence in the expected outturn for
the full year in which the Group is expected to generate a positive
material EBITDA.
The Board anticipates full year software and services revenue
growth of c.10% to 15% in the current financial year. As we move in
to FY2024, the 24i business and management team is re-orientating
its focus to deliver enhanced profitability and cash
generation.
Devices revenue in H2 2023 is expected to be higher than H1 2023
and this recovery is expected to continue in FY 2024 as inventory
levels within the supply chain continue to normalise.
24i
Demand for 24i's video streaming platform remains strong.
Investments previously made in sales and marketing have delivered
results. The 24i management team, under its new leadership, is
focused on growing revenue and ARR at double digit percentages in
FY2023, whilst ensuring targeted R&D investment and improved
customer project scoping and pricing to increase profitability in
the second half of the financial year. This will ensure a better
balance between nominal revenue growth and profitability / cash
generation in the future.
Amino
The device market is forecast to continue to grow, however, the
market has evolved with low-cost manufacturers meeting the needs of
many pay TV operators who, whilst needing to upgrade their services
to incorporate video streaming, remain focused on cost reduction.
Therefore, to better align with these changing customer needs and
to target enhanced profitability, Amino's focus will be on
delivering value through:
-- delivering higher quality, higher margin pay TV streaming devices
which can also be bundled with the Group's Software-as-a-Service
("SaaS") device management platform, Engage. This SaaS device
management platform is also integrated with third party devices
and sold on a standalone basis; and
-- driving growth in its digital signage business selling into large
integrators and via distributors.
For further information please contact:
Aferian plc +44 (0)1223 598197
Donald McGarva, Chief Executive Officer
Mark Carlisle, Chief Financial Officer
+44 (0)20 7597
Investec plc (NOMAD and Broker) 5970
David Anderson / Patrick Robb / Nick Prowting
/ Cameron MacRitchie
+44 (0)20 3727
FTI Consulting LLP (Financial communications) 1000
Matt Dixon / 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 Alternative
Investment Market (AIM: symbol AFRN). Headquartered in Cambridge,
UK, the company has over 225 staff located in 11 offices, including
major European cities as Amsterdam, Helsinki, Copenhagen, and Brno,
as well as in San Francisco and Hong Kong. For more information,
please visit www.aferian.com .
Chief Executive Officer's Review
The Group has continued to make progress in improving the
quality of its earnings and enhancing revenue visibility as it
executes on its strategy to grow software and services revenue in
the fast-growing video streaming market. Exit run rate Annual
Recurring Revenue ("ARR") increased to $18.8m representing 19%
growth year-on-year. Software and services revenue for the period
also increased to $14.0m, an increase of 17% versus the prior
year.
Sales of streaming devices, however, were significantly lower
than the prior period at $9.4m, representing a decrease of 71%
year-on-year. Whilst the video streaming device market continues to
grow, the number of devices shipped in the period was impacted by
customers de-stocking in response to reduced lead-times after
building up stocks to weather post-COVID supply chain challenges.
This downturn in Amino revenues has had a significant impact on
Group results for the period.
Consequently, Group revenue in the period was $23.3m, a decrease
of 48% versus the prior year. As a result, we took proactive steps
to reduce the Group's cost base in both 24i and Amino in February
2023 and, post period end in June 2023, we took further action to
reduce costs in the Amino business. Together these actions have
generated c$8m of annualised cost savings for the Group. We have
also identified additional savings in 24i through a targeted
cost-reduction programme which is due to complete in early
September 2023.
On 31 May 2023, Aferian secured additional cash funding by way
of a shareholder loan facility of up to GBP3.25m from our largest
shareholder, Kestrel Partners LLP, of which GBP1.25m was drawn as
at 31 May 2023. On 25 July 2023, the Group successfully raised
$4.0m (before expenses) through an issue of equity share capital to
be used for general working capital purposes, replacing the need
for further drawdown of the full shareholder loan facility from
Kestrel, of which the undrawn element of GBP2.125m expired on 31
July 2023. These funds provide additional headroom in respect of
the covenants in the Group's existing bank facility.
We believe that the actions taken to reduce our cost base and
the additional cash funding provides the Group with a stronger
platform on which to build and grow. With adequate headroom already
secured over our banking covenants, we believe we now have the
resources to drive forward our advantage in the video streaming
market, which continues to grow at pace as streaming increasingly
becomes the most popular way to consume video.
As trading improves, we expect the Group's inventory levels to
reduce and cash generation to improve in the second half of the
year, reducing our net debt position.
H1 2023 Key Performance Indicators
Our key performance indicators demonstrate growth in software
& services revenue (up 17%) and exit ARR (up 19%).
H1 2023 H1 2022 Change
$m $m %
---------------------------------------- --------- -------- -------
Total revenue 23.3 44.5 (48%)
Software & services revenues 14.0 12.0 17%
Exit run rate Annual Recurring Revenue
("ARR") at 31 May 18.8 15.8 19%
Adjusted operating cashflow before tax (7.0) 6.7 N/A
Net customer revenue retention rate on
recurring revenue* 110% 113%
---------------------------------------- --------- -------- -------
*Net customer revenue retention rate on recurring revenue based
on a constant currency basis
The executive management team remain focused on reducing
inventory levels and improving cash flows whilst improving the
returns generated by investments already made in the 24i
division.
A fast-growing video streaming sector
The prospects for the video streaming sector in which both 24i
and Amino operate remain positive. The media and entertainment
sector is continuing its migration from traditional broadcast
distribution models such as cable and satellite to streaming as the
preferred mode of video delivery. Evidence of this trend can be
seen in the success of new services from traditional broadcasters
like ITV, which saw a 49% increase in overall streaming hours in
the first quarter of 2023* following the launch of its ITVX
service. It is also evident among Pay TV operators such as Sky
which signalled a significant shift away from expensive satellite
distribution with the launch in October 2022 of its first
"dish-less" product**. Sky Stream features around 150 TV channels
and on-demand content via the internet to a palm-sized streaming
device in the home.
Aferian has been at the forefront of this type of content
delivery for over 25 years and the continued transition to
streaming demonstrates a growing market opportunity for Amino's
devices and 24i's end-to-end video streaming solutions. Most
recently, post-period end, Virgin Media used its 24i integrated
solution to launch and monetise a new line-up of themed Free
Ad-supported Streaming TV ('FAST') channels on Virgin TV. 24i
worked in partnership with Amagi, the global leader in cloud-based
SaaS technology for broadcast and connected TV. An initial
selection of 14 channels have been rolled-out to Virgin Media's V6,
TV 360 and Stream set-top boxes (STBs), allowing subscribers to
instantly access an extended range of attractive content, monetised
through advertising.
While subscriber churn at household names such as Netflix and
Disney have driven some media headlines, the overall sector remains
buoyant. In April 2023, Statista forecast that revenue from
internet-based video services operating without the need for a
cable or satellite subscription (known in the industry as "over the
top TV" or "OTT") will reach 235 billion US dollars*** by 2028,
nearly double the figure reported in 2021.
Although cost-of-living pressures will inevitably make our
customers look harder at their cost base and the prices they charge
their consumers for subscriptions, we believe this presents an
opportunity for Aferian. 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/or the cost of employing
in-house streaming expertise.
Many streaming service providers, including Netflix and Amazon
Prime Video, have diversified beyond subscription business models
into advertising-funded packages in response to rising competition
from the proliferation of smaller streaming services and worldwide
cost of living concerns. 24i has capitalised on this shift with the
addition of advertising-related capabilities to its end-to-end
video streaming platform****.
* https://www.digitaltveurope.com/2023/06/09/itv-measures-success-of-itvx-after-six-months/
** https://www.broadbandtvnews.com/2022/10/19/sky-stream-launches-in-the-uk/
*** https://www.statista.com/statistics/260179/over-the-top-revenue-worldwide/
**** https://www.24i.com/articles/24i-unveils-latest-advancements-to-expand-the-reach-of-fast-and-linear-channels-for-broadcasters-and-to-make-personalized-video-experiences-access
ible-to-everyone
Operational Review
24i
24i's robust, end-to-end SaaS video streaming platform enables
all kinds of video content owners and distributors to monetise
their content investments by quickly launching and efficiently
managing attractive streaming services on all consumer devices,
from mobile phones and tablets to Smart TVs and the managed devices
provided by pay TV operators. With 14 years of experience in the
market, 24i's customers include NPO, Telenor, Pure Flix and
Broadway HD.
In the first half of 2023, 24i's revenues were $11.1m, an
increase of $1.8m on H1 2022.
In March 2023, 24i unveiled two significant enhancements to its
streaming platform resulting from recent investment in research and
development. 24i Broadcaster Studio is a new pre-packaged solution
targeting the specific needs of broadcasters who want to go
direct-to-consumer (D2C) with streaming applications, rather than
relying on Pay TV operators for carriage.
At the same time, we announced three new tiered packages of
24iQ, our data-driven SaaS personalisation platform. Two tiers are
pre-integrated with the wider 24i streaming platform, enabling
companies of all sizes to rapidly take advantage of the
personalisation trend to drive user engagement and tackle churn. A
third, enterprise tier enables larger broadcasters, pay TV
operators and streaming services to get a more bespoke, managed
service tailored to their specific personalisation needs.
The launch of 24i Broadcaster Studio is part of a wider strategy
to capitalise on the growth in ad-funded streaming, and in
particular what's known as Free Ad supported Streaming TV ('FAST')
channels. Today, thousands of these streaming-only TV channels are
available on aggregation platforms worldwide. In March 2023, we
announced a partnership with global FAST experts, Amagi, in which
24i can support the owners of these channels to quickly launch
their own streaming apps, build a direct relationship with their
consumers and develop new monetisation strategies. Post period end,
the first joint Amagi and 24i customer, US food and travel video
streaming network Tastemade, launched their 24i-based apps followed
shortly thereafter by Virgin Media.
Other customer project wins in the period include Israeli Public
Broadcaster, KAN, which used 24i's application framework and SaaS
content management platform to launch a series of new Smart TV
streaming applications with sophisticated new features such as
personalisation in December 2022 to coincide with the FIFA World
Cup. The 24i-powered app was downloaded more than 380,000 times
during the tournament alone.
Demand for 24i's video streaming platform remains strong.
Investments previously made in sales and marketing have delivered
results. The 24i management team, under its new leadership, is
focused on growing revenue and ARR at double digit percentages in
FY2023, whilst ensuring targeted R&D investment and improved
customer project scoping and pricing to increase profitability in
the second half of the financial year. This will ensure a better
balance between nominal revenue growth and profitability / cash
generation in the future.
Amino
Amino's managed video streaming devices and SaaS management
platform 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.
In the first half of 2023 Amino's revenues were $12.1m, a
reduction of $23.1m on H1 2022. This was due to customers delaying
device orders to temporarily reduce working capital and defer
capital expenditure. We expect this trend to continue in 2023,
albeit that we expect Amino's revenue to be higher in the second
half of the financial year. Having taken the decision in Q2 2022 to
invest in raw materials and finished goods to reduce supply chain
risks associate with the COVID pandemic, inventory in Amino at 31
May 2023 was $8.6m, $4.6m higher than at 31 May 2022. As lead times
reduce, we have taken the decision to also reduce inventory and we
expect inventory levels to reduce back towards November FY21 levels
(which were $2.6m) in H1 2024.
With Pay TV operators looking to maximise their own cost
efficiencies, Amino's SaaS device management platform continues to
gain traction in the market. This platform has now been deployed by
over 120 Pay TV operators who use it to remotely maintain and
upgrade devices located in consumer homes, ensuring they maintain a
high level of service quality whilst also reducing customer support
costs. Unlike previous generations of satellite and cable TV
set-top-boxes, streaming devices can be posted to customers,
self-installed and remotely managed, providing a major cost saving
compared to the old model of an engineer home visit installation
for every customer.
We have also continued to see progress in the deployment of our
digital signage devices. These are used to stream information and
entertainment content to digital displays in a wide range of
settings, from betting shops and stadiums to healthcare facilities,
retail outlets, transportation hubs and government facilities. Our
devices have now been deployed into a number of international
Airports in India. Paddy Power is also migrating its services from
legacy satellite delivery to next gen low latency IP video delivery
using Amino digital signage devices throughout its shops in the UK
and Ireland. Improved quality and reduced latency not only improve
the customer experience, but also reduces Paddy Power's costs with
Amino's platform providing secure remote device management and
control across their widely distributed network.
The video streaming device market is forecast to continue to
grow, however, the market has evolved with low-cost manufacturers
meeting the needs of many pay TV operators who, whilst needing to
upgrade their services to incorporate video streaming, remain
focused on cost reduction. Therefore, to enhance profitability,
Amino's focus will be on delivering value to its customers
through:
-- delivering higher quality, higher margin pay TV streaming devices
which can also be bundled with the Group's Software-as-a-Service
("SaaS") device management platform, Engage. This SaaS device management
platform is also integrated with third party devices and sold on
a standalone basis; and
-- driving growth in its digital signage business selling into large
integrators and via distributors.
Environmental, Social and Governance ("ESG")
Today, we have published an update to our ESG report. This can
be found on our website at https://aferian.com/esg . In April 2023,
we were delighted to be awarded a prestigious Sustainability
Leadership Award at the National Association of Broadcasters annual
conference in the US. Amino was honoured in the medium-sized
company category in recognition of the company's outstanding
innovations in media technology that promote conservation and
reusability of natural resources and foster economic and social
development. The award recognised Amino for taking critical steps
to transform its business in line with a sustainable future and
aligned with the UN's Sustainability Development Goals (SDG).
During the first half of the year, we have seen excellent
engagement from staff across both 24i and Amino in our "Do The
Right Thing" initiative which encourages staff to suggest new ways
in which we can promote sustainability, diversity and good
governance across the Group. Ideas that have been adopted include a
bike plan proposed by an employee in Amsterdam which will provide
funding to employees to help them buy a bicycle suitable for
commuting.
In May 2023, we commenced an Employee Wellbeing campaign that
challenges the teams in our global offices to devise activities
that promote better physical, mental, social and financial
wellbeing. Our first cohort of Mental Health First Aiders have
completed their training and we have begun a programme to promote
more inclusivity and diversity in our recruitment and onboarding
processes. A programme of activities focused on physical wellbeing
has included trials of walking meetings, charity run sponsorship,
guided stretching sessions and a 60-day walking challenge.
The 24i team have also continued their support of Czechitas, a
non-profit organisation in the Czech Republic which retrains women
for careers in IT. Several cohorts of students have now undertaken
workshops at our offices, and we have now expanded the partnership
to provide mentorship opportunities with some of our staff.
Current Trading and Outlook
Trading remains in line with the trading and outlook
communicated in our trading statement on 28 June 2023. For the full
year ended 30 November 2023, 91% of management's forecast Group
revenues are contracted. The remaining 9% is covered by a
well-developed sales pipeline. Combined with the cost reduction
actions taken above, this provides the Board with confidence in the
expected outturn for the full year in which the Group is expected
to generate a positive material EBITDA.
Chief Financial Officer's review
As indicated in the trading update of 28 June 2023, the interim
results reflect management's strategic focus on profitable software
and services revenue growth in the 24i division and on higher
quality, higher margin streaming devices and device management
software in the Amino division.
High margin software & services revenues increased by 17% to
$14.0m (H1 2022: $12.0m). In addition, exit run rate ARR increased
to $18.8m (H1 2022: $15.8m), representing growth of 19%. As
forecast, device revenues in the first half are $9.4m (H1 2022:
$32.5m), representing a decrease of 71% year-on-year. Consequently,
Group revenue for the period is $23.3m (H1 2022: $44.5m).
Adjusted operating cashflow before tax was a $7.0m outflow (H1
2022: $6.7m inflow), primarily driven by the reduction in EBITDA as
a result of the significant decrease in device revenue as well as a
working capital outflow of $6.9m primarily relating to payments for
inventory built up in H2 2022. The Group's inventory balance at 31
May 2023 was $8.6m (31 May 2022: $4.0m). After $4.1m payments for
professional fees associated with the previously communicated
aborted acquisition incurred in 2022 as well as $1.1m restructuring
costs resulting from the cost reduction actions taken by management
in February 2023, operating cash flow before tax was a $12.3m
outflow (H1 2022: $4.9m inflow).
As a result of these operating cash outflows, the Group had net
debt of $12.9m as at 31 May 2023 (30 November 2022: $4.0m net
cash).
The Group has a loan facility with Barclays Bank plc, Silicon
Valley Bank, and Bank of Ireland, which has a committed term to 23
December 2024 with options to extend by a further one or two years.
On 31 May 2023 the Group agreed to reduce the total amounts
available under this facility from $50 million to $25.4 million.
The Group had drawn $17.5m of this facility at 31 May 2023 (30
November 2022: $7.5m).
In addition, on 31 May 2023, the Group secured a shareholder
loan facility of up to GBP3.25 million arranged by its largest
shareholder, Kestrel Partners LLP, of which GBP1.25m was drawn as
at 31 May 2023.
On 25 July 2023, the Group successfully raised $4.0m (before
expenses) through an equity placing to be used for general working
capital purposes, replacing the need for further drawdown of the
shareholder loan from Kestrel, of which the undrawn element
GBP2.125m expired on 31 July 2023. These funds provide additional
headroom in respect of the covenants in the Group's existing bank
facility.
Net debt is expected to reduce over the remainder of the current
financial year as inventory levels reduce.
Revenue
H1 2023 H1 2022 Change
$m $m
------------------------------ -------------- -------------- ---------------
Software and services
Revenue
Recurring 9.5 8.2 16%
Non-recurring 4.5 3.8 18%
Total revenue 14.0 12.0 17%
Devices including integrated
software
Revenue
Non-recurring 9.4 32.5 (71%)
Total
Revenue
Recurring 9.5 8.2 16%
Non-recurring 13.8 36.3 (62%)
Total revenue 23.3 44.5 (48%)
------------------------------ -------------- -------------- ---------------
At 31 May 2023, exit run rate ARR increased to $18.8m (H1 2022:
$15.8m). On a constant currency basis exit run rate ARR at 31 May
2023 would have been $18.9m. The increase in exit run rate ARR
provides enhanced revenue visibility as the Group moves
forward.
Higher margin software & services revenue increased by 17%
to $14.0m (H1 2022: $12.0m), representing 60% of total revenues for
the period (H1 2022: 27%), of which 68% was recurring (H1 2022:
68%). This demonstrates that the Group continues to make
encouraging progress in executing on its strategy to grow software
and services revenue in the fast-growing video streaming
market.
Devices revenues, however, were significantly lower than the
prior period at $9.4m (H1 2022: $32.5m), representing a decrease of
71% year on year. Whilst the video streaming device market
continues to grow, the number of devices shipped in the period
significantly reduced due to wider macro-economic impact, and
customers de-stocking in response to reduced lead-times after
building up stocks to weather post-COVID supply chain
challenges.
Revenue and adjusted EBITDA
Revenue Adjusted EBITDA
H1 2023 H1 2022 H1 2023 H1 2022
$m $m $m $m
------------------------- ---------- ----------- ------- ------------ ----------
24i 11.3 9.3 1.4 0.6
Amino 12.1 35.2 (0.5) 6.5
Central costs - - (1.0) (1.3)
------------------------- ---------- ----------- ------- ------------ ----------
Total 23.3 44.5 (0.1) 5.8
------------------------- ---------- ----------- ------- ------------ ----------
Adjusted EBITDA for the six months to 31 May 2023 was a loss of
$0.1m (H1 2022: $5.8m profit). 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
H1 2023 H1 2022
$m $m
-------------------------------- --------- --------
Software & services 11.1 9.3
Device revenues 0.2 -
Revenue 11.3 9.3
Adjusted cost of sales (3.2) (2.6)
-------------------------------- --------- --------
Adjusted gross profit margin 8.1 6.7
Adjusted gross profit margin % 72% 72%
Adjusted operating costs (6.7) (6.1)
-------------------------------- --------- --------
Adjusted EBITDA* 1.4 0.6
Adjusted EBITDA margin % 12% 6%
Capitalised development costs 2.6 3.2
-------------------------------- --------- --------
*Adjusted EBITDA is a non-GAAP measure and excludes
depreciation, amortisation, interest, tax, exceptional items and
share based payment charges.
With the increased focus on improving visibility, ARR has grown
from $11.3m to $14.2m in the last 12 months. This represents
year-on-year growth of 26% (constant currency basis: 26%). 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 remained
consistent with H1 2022 at 72%.
Furthermore, adjusted operating costs increased by $0.6m during
the period, mainly driven by investment made in additional
resources for customer-onboarding as the business is growing. The
24i management team are focused on accelerating profitability in
the second half of the financial year and beyond.
Amino segment
H1 2023 H1 2022
$m $m
---------------------------------------
Software & services 2.9 2.7
Devices including integrated software 9.2 32.5
Revenue 12.1 35.2
Adjusted cost of sales (7.1) (22.5)
--------------------------------------- ------------ -----------
Adjusted gross profit 5.0 12.7
Adjusted gross profit margin % 40% 36%
Adjusted operating costs (5.5) (6.2)
--------------------------------------- ------------ -----------
Adjusted EBITDA* (0.5) 6.5
Adjusted EBITDA margin % (4%) 18%
Capitalised development costs 0.7 1.0
--------------------------------------- ------------ -----------
*Adjusted EBITDA is a non-GAAP measure and excludes
depreciation, amortisation, interest, tax, exceptional items and
share based payment charges.
Devices revenues were significantly lower than the prior period
at $9.2m (H1 2022: $32.5m), representing a decrease of 72%
year-on-year. Whilst the video streaming device market continues to
grow, the number of devices shipped decreased significantly in the
period due to wider macro-economic impact, and customers
de-stocking in response to reduced lead-times after building up
stocks to weather post-COVID supply chain challenges.
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% (H1 2022: 91%) of total device revenue.
Devices revenue in H2 2023 is expected to be higher than H1 2023
and this recovery is expected to continue in FY 2024 as inventory
levels continue to normalise within the supply chain. The Amino
division will now focus on higher quality, higher margin streaming
devices which can also be bundled with its SaaS device management
platform. This SaaS device management platform is also integrated
with third party devices and sold on a standalone basis. With
encouraging initial traction, the Amino division will also look to
continue to grow its digital signage business.
Central costs
H1 2023 H1 2022
$m $m
Adjusted operating costs and adjusted EBITDA (1.0) (1.3)
---------------------------------------------- --------- --------
Central costs comprise the costs of the Board, including
executive directors, as well as costs associated with the Company's
listing on the London Stock Exchange.
Adjusted EBITDA
H1 2023 H1 2022
$m $m
--------------------------------------------
Revenue 23.3 44.5
Adjusted cost of sales (10.3) (25.1)
-------------------------------------------- ------------ -----------
Adjusted gross profit 13.0 19.4
Adjusted gross profit margin % 56% 44%
Customer support and professional services (2.8) (2.9)
Research and development expenses (2.6) (2.9)
SG&A (7.7) (7.8)
Total adjusted operating expenses (13.1) (13.6)
Adjusted EBITDA (0.1) 5.8
-------------------------------------------- ------------ -----------
Research & development ('R&D') costs
The Group continues to invest in research and in the development
of new products and spent $5.9m on R&D activities (H1 2022:
$7.1m), of which $3.2m (H1 2022: $4.2m) was capitalised.
H1 2023 % of revenue H1 2022
$m $m % of
revenue
-------------------------------- --------- -------------- -------- ---------
Core engineering expenses 4.9 21% 6.1 14%
Product management - H1 2022
restated* 0.5 3% 0.6* 1%
R&D senior management 0.4 2% 0.4 1%
-------------------------------- --------- -------------- -------- ---------
Total research and development
costs 5.8 25% 7.1 16%
-------------------------------- --------- -------------- -------- ---------
Less Capitalised development
costs (3.2) - (4.2) -
-------------------------------- --------- -------------- -------- ---------
Net research and development
expense 2.6 - 2.9 -
-------------------------------- --------- -------------- -------- ---------
*Product management costs of $0.3m in H1 2022 have been
reclassified from core engineering expenses to be consistent with
the classification methodology used in H1 2023.
Selling, general and administrative (SG&A) expenses have
remained consistent with prior period at $7.8m. The Group's spend
on core engineering activities has decreased by $1.2m in the period
to $4.9m (H1 2022: $6.1m) with capitalised development costs also
down $1.0m to $3.2m (H1 2022: $4.2m). This is due to the actions
taken by management in February 2023 which has reduced the Group's
annualised operating cost base by c.$2.9m and in turn the capital
research and development spend by c.$1.8m.
A reconciliation of Adjusted EBITDA to operating (loss)/profit
is provided as follows:
H1 2023 H1 2022
$m $m
--------------------------------------------- --------- --------
Adjusted EBITDA (0.1) 5.8
Exceptional items within operating expenses (1.2) (0.5)
Employee share-based payment charge (0.3) (0.3)
Depreciation and amortisation (6.4) (5.6)
--------------------------------------------- --------- --------
Operating loss (8.0) (0.6)
--------------------------------------------- --------- --------
Exceptional items
Exceptional items for the period comprised:
-- $1.2m (H1 2022: $0.3m) redundancy and associated restructuring costs; and
-- $nil (H1 2022: $0.2m) acquisition and associated one-off legal costs.
Depreciation and amortisation
Excluding amortisation of intangibles recognised on acquisition,
depreciation and amortisation was $4.1m (H1 2022: $3.3m).
Amortisation of intangibles recognised on acquisitions was $2.4m
(H1 2022: $2.2m). The increase of $0.2m in the period relates to
the acquisition of The Filter in April 2022.
Taxation
The tax charge of $0.0m (H1 2022: $0.7m) comprises:
-- $0.3m (H1 2022: $0.9m) current tax charge; and
-- $0.2m (H1 2022: $0.2m) credit relating to the unwinding of
deferred tax assets and liabilities recognised on acquisitions.
Loss after tax was $8.7m loss (H1 2022: $1.5m loss).
Cash flow
A reconciliation of adjusted operating cash flow before tax to
cash generated from operations before tax is provided as
follows:
H1 2023 H1 2022
$m $m
----------------------------------------------- --------- --------
Adjusted operating cashflow before tax (7.0) 6.7
Post-acquisition integration and associated
restructuring costs (1.2) (0.3)
Acquisition and associated one-off legal
costs - (0.2)
One-off refinancing costs - H1 2022 restated* - (1.3)
Acquisition costs for the aborted acquisition (4.1) -
in prior year
Cash generated from operations before tax (12.3) 4.9
----------------------------------------------- --------- --------
*Restated as a result of bank loan facility set up costs of
$1.3m being reclassified from interest paid within cash used in
financing activities to movements on trade and other receivables
within cash generated from operations before tax see note 8.
Adjusted cash flow from operations before tax was a $7.0m
outflow (H1 2022: $6.7m inflow - restated), a decrease of 204% due
to the reduction in EBITDA as a result of the significant decrease
in device revenues, together with a working capital outflow of
$6.9m primarily relating to payments for inventory built up in H2
2022.
Cash generated from operations before tax was $12.3m outflow (H1
2022: $4.9m inflow), $4.1m payments for professional fees
associated with the aborted acquisition incurred in 2022 as well as
$1m restructuring and legal costs associated with the cost
reduction actions taken by management in February 2023.
Tax payments, principally in respect of corporation tax,
totalled $0.3m during the period (H1 2022: $1.9m), after $0.2m tax
rebate received for FY2021.
During the period, the Group spent $nil (H1 2022: $0.1m) on
capital expenditure in respect of tangible fixed assets and
capitalised $3.3m of research and development costs (H1 2022:
$4.2m). The decrease of $0.9m was mainly driven by the cost
reduction actions taken in February 2023.
Interest paid in the period of $0.5m (H1 2022: $0.2m) includes
bank loan and overdraft interest.
Financial position
The Group had net debt of $12.9m as at 31 May 2023 (30 November
2022: $4.0m cash). On 31 May 2023 the Group agreed with its
existing banking facility providers to reduce the total available
loan facility from $50 million to $25.4 million. Of the total
available loan facility of $25.4m, $17.5m was drawn at 31 May 2023
(30 November 2022: $7.5m) , $0.1m is committed performance bond
facilities, and the remaining $7.8m loan facility is undrawn
including $5m undrawn overdraft facility. The bank loan facility
has a committed term to 23 December 2024 with options to extend by
a further one or two years. In addition, on 31 May 2023, the Group
has secured a shareholder loan facility of up to GBP3.25 million
arranged by its largest shareholder, Kestrel Partners LLP, of which
GBP2.125m was un-drawn at 31 May 2023. Amounts drawn under this
shareholder loan facility (including accrued interest) are (if not
prepaid) repayable on 31 March 2025, unless extended at the
Company's option to 31 March 2026 and 31 March 2027.
Net debt is expected to reduce over the remainder of the current
financial year as inventory levels reduce. The Group remains in
compliance with its loan facilities covenants.
At 31 May 2023, the Group had total equity of $71.9m (30
November 2022: $78.9m) and net current liabilities of $8.5m (30
November 2022: $1.4m).
Dividend
The Board is not proposing an interim dividend (H1 2022: 1.0 GBP
pence).
Going concern
The Directors have considered it appropriate to prepare these
consolidated interim financial statements on a going concern basis.
The Directors assessment of going concern including is set out in
note 2.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group remain
consistent with the principal risks and uncertainties reported in
Aferian's 2022 Annual Report.
Mark Carlisle
Chief Financial Officer
31 August 2023
Consolidated income statement
For the six months ended 31 May 2023
Six months Six months ended
ended 31 May 2022
31 May 2023 Unaudited
Unaudited
Notes $000s $000s
------------------------------------ ----- ------------- ------------------
Revenue 3 23,348 44,517
Cost of sales (10,332) (25,106)
------------------------------------ ----- ------------- ------------------
Gross profit 13,016 19,411
Operating expenses (21,000) (20,010)
Operating loss (7,984) (599)
Adjusted operating (loss)/profit (4,172) 2,378
Share based payment charge (286) (310)
Exceptional items 6 (1,151) (516)
Amortisation of acquired intangible
assets (2,375) (2,151)
------------------------------------ ----- ------------- ------------------
Operating loss (7,984) (599)
------------------
Finance expense (1,199) (223)
Finance income 534 11
------------------------------------ ----- ------------- ------------------
Net finance expense (665) (212)
------------------------------------ ----- ------------- ------------------
Loss before tax (8,649) (811)
Tax charge (43) (659)
------------------------------------ ----- ------------- ------------------
Loss after tax (8,692) (1,470)
------------------------------------ ----- ------------- ------------------
Basic earnings per 1p ordinary
share 7 (10.20c) (1.76c)
Diluted earnings per 1p ordinary
share 7 (10.20c) (1.78c)
------------------------------------ ----- ------------- ------------------
Consolidated statement of comprehensive income
For the six months ended 31 May 2023
Six months Six months ended
ended 31 May 2022
31 May 2023 Unaudited
Unaudited
$000s $000s
---------------------------------------- ------------ ----------------
Loss for the period (8,692) (1,470)
---------------------------------------- ------------ ----------------
Foreign exchange difference arising on
consolidation 1,960 (4,232)
---------------------------------------- ------------ ----------------
Other comprehensive income/(loss) 1,960 (4,232)
---------------------------------------- ------------ ----------------
Total comprehensive loss for the period (6,732) (5,702)
---------------------------------------- ------------ ----------------
Consolidated balance sheet
As at 31 May 2023 As at As at
31 May 2023 30 November
Unaudited 2022
Assets Notes $000s $000s
----------------------------------- ----- ------------ ------------
Non-current assets
Property, plant and equipment 388 496
Right of use assets 1,818 2,276
Intangible assets 80,430 81,021
Other receivables 183 183
----------------------------------- ----- ------------ ------------
82,819 83,976
----------------------------------- ----- ------------ ------------
Current assets
Inventories 8,607 9,222
Trade and other receivables 13,457 19,846
Corporation tax receivable 205 654
Cash and cash equivalents 6,072 11,524
----------------------------------- ----- ------------ ------------
28,341 41,246
----------------------------------- ----- ------------ ------------
Total assets 111,160 125,222
----------------------------------- ----- ------------ ------------
Capital and reserves attributable
to equity holders of the business
Called-up share capital 1,488 1,488
Share premium 39,870 39,768
Capital redemption reserve 12 12
Foreign exchange reserves (6,762) (8,722)
Merger reserve 42,750 42,750
Retained earnings (4,952) 3,587
----------------------------------- ----- ------------ ------------
Total equity 72,406 78,883
----------------------------------- ----- ------------ ------------
Liabilities
Current liabilities
Trade and other payables 16,347 33,534
Lease liabilities 797 1,121
Corporation tax payable - 505
Loans and borrowings 5 17,764 7,531
34,908 42,691
----------------------------------- ----- ------------ ------------
Non-current liabilities
----------------------------------- ----- ------------ ------------
Trade and other payables 355 1,070
Lease liabilities 1,034 1,177
Loans and borrowings 5 1,227 -
Provisions 289 288
Deferred tax liability 941 1,113
----------------------------------- ----- ------------ ------------
3,846 3,648
----------------------------------- ----- ------------ ------------
Total liabilities 38,754 46,339
----------------------------------- ----- ------------ ------------
Total equity and liabilities 111,160 125,222
----------------------------------- ----- ------------ ------------
Consolidated Cash Flow Statement
For the six months ended 31 May 2023
Six months Six months
ended 31 May ended 31 May
2023 2022
Unaudited Unaudited
Restated
Notes $000s $000s
-------------------------------------------- ----- ------------- -------------
Cash flows from operating activities
Cash generated from operations 8 (12,254) 6,229
Net corporation tax paid (268) (1,864)
-------------------------------------------- ----- ------------- -------------
Net cash (used in)/generated from operating
activities (12,522) 4,365
-------------------------------------------- ----- ------------- -------------
Cash flows from investing activities
Expenditure on intangible assets (3,288) (4,156)
Payment of deferred consideration on
acquisition - (503)
Purchase of property, plant and equipment (36) (124)
Interest received 3 -
Acquisition of subsidiary, net of cash
acquired - (1,545)
-------------------------------------------- ----- ------------- -------------
Net cash used in investing activities (3,321) (6,328)
-------------------------------------------- ----- ------------- -------------
Cash flows from financing activities
Interest paid (464) (1,531)
Lease liability repayments (639) (629)
Proceeds from borrowings 15,813 -
Repayment of borrowings (4,500) -
Dividends paid - (2,297)
-------------------------------------------- ----- ------------- -------------
Net cash generated from/(used in) financing
activities 10,210 (4,457)
-------------------------------------------- ----- ------------- -------------
Net decrease in cash and cash equivalents (5,633) (6,420)
Cash and cash equivalents at start of
the period 11,524 14,182
Effects of exchange rate fluctuations
on cash held 181 -
-------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end of
period 6,072 7,762
-------------------------------------------- ----- ------------- -------------
Notes to the interim condensed consolidated unaudited financial
information
Six months ended 31 May 2023
1 General information
Aferian plc ('the Company') and its subsidiaries (together 'the
Group') specialise in the delivery of next generation video
experiences over IP using its end-to-end solution. This comprises
the 24i online video solution and Amino video streaming devices and
associated operating and device management software.
The Company is a public limited company which is listed on the
AIM market of the London Stock Exchange and is incorporated and
domiciled in England and Wales.
2 Basis of preparation
These interim consolidated financial statements have been
prepared using accounting policies based on United Kingdom adopted
international accounting standards ('IFRS') . They do not include
all disclosures that would otherwise be required in a complete set
of financial statements and should be read in conjunction with the
30 November 2022 Annual Report. The financial information for the
six months ended 31 May 2023 and 31 May 2022 does not constitute
statutory accounts within the meaning of Section 434 (3) of the
Companies Act 2006 and both periods are unaudited.
The annual financial statements of Aferian Plc ('the Group')
were prepared in accordance with United Kingdom adopted
international accounting standards ('IFRS'). The statutory Annual
Report and Financial Statements for 2022 have been filed with the
Registrar of Companies. The Independent Auditors' Report on the
Annual Report and Financial Statements for the year ended 30
November 2022 was unmodified, drew attention to a material
uncertainty related to going concern and did not contain a
statement under 498(2) - (3) of the Companies Act 2006.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2022 annual financial statements, except for those that
relate to new standards and interpretations effective for the first
time for periods beginning on (or after) 1 January 2022 and will be
adopted in the 2023 financial statements. There are deemed to be no
new and amended standards and/or interpretations that will apply
for the first time in the next annual financial statements that are
expected to have a material impact on the Group.
Going Concern
The interim consolidated financial statements have been prepared
on a going concern basis. The ability of the Group to continue as a
going concern is contingent of the ongoing working capital
facilities and wider viability of the Group. The Group meets its
day-to-day working capital requirements through its cash balances,
working capital facilities and wider working capital
management.
The Group had net debt of $12.9m as at 31 May 2023 (30 November
2022: $4.0m cash) and a multicurrency working capital facility of
$25.4m, of which $17.5m was drawn at 31 May 2023 (30 November 2022:
$7.5m). On 31 May 2023 the Group agreed with its existing banking
facility providers to reduce the total available loan facility from
$50 million to $25.4 million. At 31 May 2023, of the remaining
$7.9m facility $0.1m is committed performance bond facilities with
the remaining $7.8m undrawn including $5m undrawn overdraft. In
addition, on 31 May 2023, the Group secured additional cash funding
by way of a shareholder loan of up to GBP1.125 million from our
largest shareholder, Kestrel Partners LLP.
On 25 July 2023, the Group successfully raised $4.0m through an
issue of equity share capital to be used for general working
capital, replacing the need for further drawdown of the shareholder
loan from Kestrel, of which the undrawn element GBP2.125m expired
on 31 July 2023. These funds provide additional headroom in respect
of the covenants in the Group's existing bank facility.
The Directors have reviewed the Group's going concern position
taking account of its current business activities and forecast
performance. The factors likely to affect its future development
are set out in these consolidated interim financial statements. In
carrying out the going concern assessment, the Directors have
prepared a base case cash flow forecast for the next 12 months
which includes 91% of forecast revenue being contracted for FY23.
In addition, they have prepared a downside scenario, where lower
forecast sales are achieved in addition to a significantly higher
working capital requirement.
Overall, if the base case forecast is achieved, the Group will
be able to operate within its existing working capital facilities.
However, the recovery of Amino's revenues, continued growth in 24i
and reduction in working capital expected in the second half of
FY23 are key. The material cost reduction management actions taken
since February 2023 mean that the Group is expected to generate a
material positive EBITDA in the second half of FY23 even in the
forecast downside scenario. However, failure to achieve the base
case view of forecast sales and reduction in working capital could
result in the Group failing to comply with financial covenants
associated with its existing bank facility, potentially resulting
in the facilities being withdrawn.
In reaching their going concern assessment, the Directors have
considered the foreseeable future, a period extending at least 12
months from the date of approval of these consolidated interim
financial statements. Taking account of these matters, the
Directors have concluded that the circumstances set forth above
indicates the existence of a 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 appropriate to prepare these
consolidated interim financial statements on a going concern basis
and they do not include the adjustments that would be required if
the Group were unable to continue as a going concern.
The Board of Directors approved this interim report on 31 August
2023.
3 Revenue
The geographical analysis of revenue from external customers
generated by the identified operating segment is:
Six months Six months
ended ended
31 May 2023 31 May 2022
Unaudited Unaudited
$000s $000s
------------------ ------------ ------------
North America 7,961 16,019
Latin America 1,652 6,027
------------------ ------------ ------------
Netherlands 6,449 13,540
Rest of EMEA 6,505 7,829
------------------ ------------ ------------
EMEA 12,954 21,369
Rest of the World 781 1,102
------------------ ------------ ------------
23,348 44,517
------------------ ------------ ------------
The Group's revenue disaggregated by product is as follows:
Six months Six months
ended ended
31 May 2023 31 May 2022
Unaudited Unaudited
$000s $000s
------------------------------------------ ------------ ------------
Devices incorporating integrated software
and associated accessories 9,393 32,457
Software and services 13,955 12,060
------------------------------------------ ------------ ------------
23,348 44,517
------------------------------------------ ------------ ------------
4 Segmental analysis
Operating segments are reported in a manner consistent with the
internal reporting provided to the Aferian plc Chief Operating
Decision Maker ("CODM") for the use in strategic decision making
and monitoring of performance. The CODM has been identified as the
Group Chief Executive and the Chief Financial Officer. The CODM
reviews the Group's internal reporting in order to assess
performance and allocate resources. Performance of the operating
segments is based on adjusted EBITDA. Information provided to the
CODM is measured in a manner consistent with that in the Financial
Statements.
The Group reports three operating segments to the CODM:
-- the development and sale of video streaming devices and solutions,
including licensing and support services ("Amino");
-- development and sale of the 24i end-to-end streaming platform
and associated services. This includes the results of 24iQ (formerly
called the Filter) and FokusOnTV (formerly called Nordija A/S);
and
-- central costs which comprise the costs of the Board, including
the executive directors as well as costs associated with the Company's
listing on the London Stock Exchange.
Revenues and costs by segment are shown below.
Central
Amino 24i costs Total
2023 $000s $000s $000s $000s
Software and
Revenue services 2,884 11,071 - 13,955
Devices * 9,185 208 - 9,393
---------------------- ------------- -------- -------- -------- ---------
Total 12,069 11,279 - 23,348
% Recurring 20% 63% - 41%
Adjusted cost
of sales (7,162) (3,170) - (10,332)
---------------------- ------------- -------- -------- -------- ---------
Adjusted gross
profit 4,907 8,109 - 13,016
Adjusted operating expenses (5,477) (6,693) (957) (13,127)
------------------------------------- -------- -------- -------- ---------
Adjusted EBITDA (570) 1,416 (957) (111)
Exceptional items within operating
expenses (1,151)
Share based payment charge (286)
Depreciation, amortisation,
and loss on disposal of fixed
assets (6,436)
------------------------------------- -------- -------- -------- ---------
Operating loss (7,984)
Net finance expense (665)
---------------------- ------------- -------- -------- -------- ---------
Loss before
tax (8,649)
---------------------- ------------- -------- -------- -------- ---------
Additions to non-current assets:
Capitalised development costs 675 2,571 - 3,246
------------------------------------- -------- -------- -------- ---------
* incorporating integrated Amino software and associated
accessories.
4 Segmental analysis (continued)
Central
Amino 24i costs Total
2022 $000s $000s $000s $000s
Software and
Revenue services 2,723 9,311 - 12,034
Devices * 32,483 - - 32,483
---------------------- ------------- --------- -------- -------- ---------
Total 35,206 9,311 - 44,517
% Recurring 7% 62% - 19%
Adjusted cost
of sales (22,484) (2,622) - (25,106)
---------------------- ------------- --------- -------- -------- ---------
Adjusted gross
profit 12,722 6,689 - 19,411
Adjusted operating expenses (6,237) (6,046) (1,346) (13,629)
------------------------------------- --------- -------- -------- ---------
Adjusted EBITDA 6,485 643 (1,346) 5,782
Exceptional items within operating
expenses (516)
Share based payment charge (310)
Depreciation, amortisation,
and loss on disposal of fixed
assets (5,555)
------------------------------------- --------- -------- -------- ---------
Operating loss (599)
Net finance expense (212)
---------------------- ------------- --------- -------- -------- ---------
Loss before
tax (811)
---------------------- ------------- --------- -------- -------- ---------
Additions to non-current assets:
Capitalised development costs 998 3,158 - 4,156
------------------------------------- --------- -------- -------- ---------
* incorporating integrated Amino software and associated
accessories.
5 Loans and borrowings
As at As at 30 November
31 May 2023 2022
Unaudited
$000s $000s
------------------------------- ------------ -----------------
Current
Bank loans (secured)
17,764 7,531
Non-current
Shareholder loans (unsecured) 1,227 -
Total borrowings 18,991 7,531
------------------------------- ------------ -----------------
There is no difference between the book value and the fair value
of the bank loan. The bank loan is denominated in USD and the rate
at which the loan interest is payable is between 2.1% and 2.75%
above bank reference rate depending on the gross leverage cover
ratio. The bank loan is secured by a fixed and floating charge over
all assets of the Group. On 31 May 2023 the Group agreed to reduce
the total amounts available under the bank loan facility from $50
million to $25.4 million. The Group had drawn $17.5m of this
facility at 31 May 2023 (30 November 2022: $7.5m), which is
included in current liabilities together with the accrual interests
on the loan.
On 31 May 2023, the Group secured a shareholder loan facility of
up to GBP3.25 million arranged by its largest shareholder, Kestrel
Partners LLP, of which GBP1.25m was drawn as at 31 May 2023. The
Group has the option, until 31 July 2023, to draw the remaining
GBP2.125 million. Amounts drawn under this facility (including
accrued interest) are (if not prepaid) repayable on 31 March 2025,
unless extended at the Group's option to 31 March 2026 and 31 March
2027. Following the initial drawing of GBP1.125 million of the
Shareholder Loan, Warrants over 4.5 million ordinary shares are
issuable to the Lender, Kestrel Partners LLP, representing
approximately 5.2% of Group's issued share capital. Full exercise
of the Warrants over 4.5 million ordinary shares issuable in
connection with the initial GBP1.125 million drawing of the
shareholder loan would result in cash proceeds of GBP765,000
payable to Aferian and full exercise of all Warrants issuable in
connection with the shareholder loan if it were fully drawn would
result in cash proceeds of GBP2.21 million payable to the
Group.
The Shareholder loan constitutes a form of convertible debt
which is accounted for as a compound instrument under IAS 32. The
fair value of the shareholder loan liability component is
recognised as non-current liability as the loan is repayable on 31
March 2025, and calculated based on the present value of the
contractual stream of future cash flows discounted at the market
rate of interest that would have been applied to an instrument of
comparable credit quality with substantially the same cash flows,
on the same terms, but without the conversion option. The residual
shareholder loan book value is recognised as the equity
component.
6 Exceptional items
Exceptional items included in operating (loss)/profit comprise
the following charges:
Six months ended Six months ended
31 May 2023 31 May 2022
Unaudited Unaudited
$000s $000s
-------------------------------------------- ---------------- ----------------
Post-acquisition integration and associated
restructuring costs 1,151 289
Acquisition and associated one-off legal
costs - 227
Subtotal operating expenses 1,151 516
-------------------------------------------- ---------------- ----------------
Total exceptional items 1,151 516
-------------------------------------------- ---------------- ----------------
Exceptional items within net finance expense comprise the
following charges/(credits):
Six months ended Six months ended
31 May 2023 31 May 2022
Unaudited Unaudited
$000s $000s
----------------------------------------------- ---------------- ----------------
Credit in relation to movement in contingent (530) -
consideration
----------------------------------------------- ---------------- ----------------
Subtotal finance income (530) -
----------------------------------------------- ---------------- ----------------
Unwinding discount on contingent consideration 198 -
Subtotal finance expense 198 -
----------------------------------------------- ---------------- ----------------
Total exceptional items (332) -
----------------------------------------------- ---------------- ----------------
Exceptional items are items which are material or non-recurring
in nature and which are therefore presented separately from
underlying operating expenses and income. Material costs may
include: release of contingent consideration no longer payable,
release of royalty costs recognised in prior years and subsequent
renegotiated, redundancy and associated costs, legal and
professional advisor fees in respect of acquisitions costs,
contingent post acquisition remuneration payable and additions,
aborted acquisition costs or releases to the provision for
uncertain tax provisions. Material income comprises amounts outside
the course of normal trading activities.
Furthermore, the Group considers the fair value movement in
contingent consideration and the unwinding of the discount on
contingent consideration to be adjusting items within net finance
expenses because they are non-cash and they do not relate to the
day-to-day trading activities of the Group. They are treated as
adjusting items below adjusted operating profit but not presented
on the face of the consolidated income statement.
7 Earnings per share
Six months ended Six months ended
31 May 2023 31 May 2022
Unaudited Unaudited
Restated
$000s $000s
---------------------------------------------- ---------------- ----------------
Loss attributable to shareholders (8,692) (1,470)
---------------------------------------------- ---------------- ----------------
Exceptional items 1,151 516
Share-based payment charges 286 310
Finance income (see note 5) (530) -
Finance expense (see note 5) 198 -
Amortisation of acquired intangible assets 2,375 2,151
---------------------------------------------- ---------------- ----------------
Tax effect thereon (243) (256)
---------------------------------------------- ---------------- ----------------
Profit attributable to shareholders excluding
exceptional items, share-based payments
and amortisation of acquired intangibles
and associated taxation (5,455) 1,251
---------------------------------------------- ---------------- ----------------
Number Number
Weighted average number of shares (Basic) 85,211,865 83,439,943
---------------------------------------------- ---------------- ----------------
Weighted average number of shares (Diluted) 86,340,346 84,890,085
---------------------------------------------- ---------------- ----------------
Basic earnings per share (cents) (10.20) (1.76)
Diluted earnings per share (cents) (10.20) (1.76)
---------------------------------------------- ---------------- ----------------
Adjusted basic earnings per share (cents) (6.40) 1.50
Adjusted diluted earnings per share (cents) (6.40) 1.47
---------------------------------------------- ---------------- ----------------
The weighted average number of shares (Diluted) has been
restated from 82,832,009 to 84,890,085 for 31 May 2022 due to the
calculation previously including proceeds from options which were
deemed to not be dilutive as at 31 May 2022. As a result, adjusted
diluted earnings per share has been restated for the period 6
months period ending 31 May 2022 from $1.51 to $1.47.
The calculation of basic earnings per share is based on profit
after taxation and the weighted average number of ordinary shares
of 1p each in issue during the period. The Company holds 1,482,502
(H1 2022: 1,488,254) of its own shares in treasury and these are
excluded from the weighted average above. The basic weighted
average number of shares also excludes 242 (H1 2022: 242) being the
weighted average shares held by the EBT in the year.
The number of dilutive share options above represents the share
options where the market price is greater than the exercise price
of the Company's ordinary shares.
8 Cash generated from operations
Six months Six months ended
ended 31 May 2022
31 May 2023 Unaudited
Unaudited
Restated
$000s $000s
------------------------------------------------ ------------ ----------------
Loss for the period (8,692) (1,470)
Tax expense 43 659
Net finance expense 665 212
Amortisation charge 5,658 4,768
Depreciation charge 778 787
Loss on disposal of property, plant & equipment - 5
Share based payment charge 286 310
Exchange differences 10 848
Decrease/(increase) in inventories 615 (1,429)
Decrease in trade and other receivables 6,307 628
Decrease in provisions - (5)
Decrease in trade and other payables (17,924) (457)
Cash (used in)/generated from operations
before tax (12,254) 4,856
------------------------------------------------ ------------ ----------------
The movement in trade and other receivables has been restated
for H1 2022 to now include a $1.3m cash outflow relating to bank
loan set-up costs that was previously classified as interest paid
within cash used in financing activities. As a result, cash
generated from operations before tax has been restated from $6.2m
to $4.9m.
Adjusted operating cash flow before tax was $7.0m outflow (H1
2022: $6.7m inflow) and is reconciled to cash generated from
operations before tax as follows:
Six months Six months ended
ended 31 May 2022
31 May 2023 Unaudited
Unaudited Restated
$000s $000s
--------------------------------------- ------------ ----------------
Adjusted operating cashflow before tax (7,003) 6,745
--------------------------------------- ------------ ----------------
Redundancy and associated costs (1,151) (289)
Acquisition and one-off legal costs - (227)
Bank loan facility set up costs - (1,373)*
Aborted acquisition costs (4,100) -
Cash generated from operations before
tax (12,254) 4,856
--------------------------------------- ------------ ----------------
*Restated as a result of bank loan facility set up costs of
$1.3m being reclassified from interest paid within cash used in
financing activities to movements on trade and other receivables
within cash generated from operations before tax.
Adjusted cash generated from operations before tax is a non-GAAP
measure and excludes cash from exceptional and one of items
relating to bank loan facility set up costs that are considered
non-trading in nature.
9 Cautionary statement
This document contains certain forward-looking statements
relating to the Group. The Group considers any statements that are
not historical facts as "forward-looking statements". They relate
to events and trends that are subject to risk and uncertainty that
may cause actual results and the financial performance of the Group
to differ materially from those contained in any forward-looking
statement. These statements are made by the Directors in good faith
based on information available to them and such statements should
be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking information.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR WPUCCRUPWPUU
(END) Dow Jones Newswires
August 31, 2023 02:00 ET (06:00 GMT)
Aferian (AQSE:AFRN.GB)
Historical Stock Chart
Von Okt 2024 bis Nov 2024
Aferian (AQSE:AFRN.GB)
Historical Stock Chart
Von Nov 2023 bis Nov 2024
