TIDMIMO
RNS Number : 2355U
IMImobile PLC
28 July 2020
IMIMOBILE PLC
("IMI" or the "Company" or the "Group")
Preliminary Results for the year ended 31 March 2020
IMImobile PLC (AIM:IMO), the global cloud communications
software and solutions provider, is pleased to announce its audited
Preliminary Results for the year ended 31 March 2020.
Key financial highlights
-- Revenue increased 20% to GBP171.2m (2019: GBP142.7m)
-- Gross profit increased 26% to GBP79.1m (2019: GBP62.6m)
o Organic(1) growth of cloud communication products of
15%, now representing 82% of gross profit. Overall,
organic(1) growth of gross profit of 7%.
-- Adjusted EBITDA(2) increased 13% to GBP21.6m (2019: GBP19.1m(3)
)
-- Adjusted profit after tax(2) increased 14% to GBP12.3m (2019:
GBP10.8m(3) )
-- Adjusted 'cash generated from operations'(2) increased 33%
to GBP24.0m (2019: GBP18.0m(3) ) with improved cash conversion(4)
of 111% (2019: 94%(3) )
-- Operating profit on a statutory basis of GBP4.6m (2019:
GBP1.0m)
-- Profit after tax on a statutory basis of GBP2.0m (2019:
loss after tax of GBP1.3m)
-- Net bank debt(5) of GBP22.2m at 31 March 2020 (2019: GBP7.6m).
Net cash of GBP2.0m as at 30 June 2020, following the Group's
post-period end share placing in April which raised gross
proceeds of GBP22.2m.
Operational highlights
-- Double-digit revenue growth across all sectors and regions
for cloud communication platform, products and services
as a result of both organic progress and strategic acquisitions
-- Strong momentum in North America:
o Cloud Communications gross profit up 152% following
successful integration of 3Cinteractive Corp. ("3C").
The region now represents 25% of the Group's gross
profit
o Signed a significant new client, one of the world's
largest retailers, for low-code CPaaS (Communications
Platform as a Service) offering
-- Strong period of new client wins, additional partnership
agreements and renewal of all major contracts in the year
ended 31 March 2020
-- Growing adoption of new richer messaging channels including
RCS (Rich Communications Services), WhatsApp Business and
Apple Business Chat
-- Continued product innovation including launching and taking
live new healthcare video consultation product, eClinic,
for the NHS
-- 46 clients providing more than GBP500k per annum revenue
(2019: 40) and 118 clients with revenues between GBP100k
- GBP500k per annum (2019: 83)
[1] Excluding acquired business of Impact Mobile and
ExpressPigeon in the current and prior years and 3Cinteractive and
Rostrvm in the current year
(2) Adjusted for costs which management do not consider reflect
underlying business performance - see note 7 for details of
adjusted performance measures, adjusting items and a reconciliation
of statutory results to adjusted results
3 Restated prior year adjusted performance measure had IFRS 16
been adopted from 1 April 2018
4 Cash conversion is defined as adjusted cash generated from
operations (see note 7) as a percentage of adjusted EBITDA
5 Bank borrowings (excluding capitalised borrowing costs) net of
cash and cash equivalents
COVID-19 update
-- Mitigated short term impact through a number of internal
cost management measures
-- Following a good Q1 FY21 performance, a number of these
measures have been reversed, including all salary reductions
except those of the Board and, since 1 July, the Group has
started to bring employees back from furlough
-- Rolled out crisis communications services for customers
including video consultation solutions, remote contact centres
and emergency broadcast alerts
-- Long term positive impact expected, accelerating need for
businesses to effectively communicate digitally with customers
-- Successful share placing in April 2020 strengthened the
balance sheet and safeguarded our financial flexibility
and optionality for future growth plans
Further detail on the Group's response to the COVID-19 pandemic
is provided in the Chairman's Statement.
Current trading and Outlook
As previously reported in our announcement on 9 July, the Group
has delivered a resilient performance in Q1 FY21 despite the
operational challenges presented by the COVID-19 pandemic.
Notwithstanding the impact to businesses globally, we strongly
believe that current trends will benefit IMImobile, evidenced by
Group gross profit being up approximately 20% year-on-year for the
quarter, with the cloud communications product set showing
year-on-year gross profit growth of over 30%.
Following period end, the Group has seen clear positive momentum
across its regions. Alongside seeing a steady recovery of client
activity in the worst-impacted industry sectors since late May
2020, the Group has been focused on strategic deployments, as
existing and new blue-chip clients look to accelerate their
adoption of digital communication strategies, that will help drive
future revenues. Performance in North America, the largest
addressable and growth market for the Group's product set,
continues to be encouraging, with new strategic deployments for
large US retailers having continued during the first quarter.
As previously disclosed, the results for Q1 FY21, together with
a good and growing visibility of earnings, underpins the Company's
confidence in achieving good year-on-year gross profit growth,
subject to the impact of any second wave of the pandemic, including
further organic growth in the cloud communications products
business, in the full year to 31 March 2021.
With an established leading position in a number of our markets,
and substantial opportunities for further growth, we are at an
exciting juncture for the business as companies increasingly focus
on digital transformation for customer engagement. Our execution of
strategy is proven, and we look forward to delivering yet another
year of growth ahead.
Jay Patel, Chief Executive Officer of IMImobile PLC,
commented:
"We have delivered another year of strong progress, with double
digit revenue growth across all sectors and regions for our core
cloud communications product set.
We had many significant achievements in the year, including the
winning of one of the world's largest retailers as a new client
through to the acquisition and integration of 3Cinteractive Corp
and the renewal of all major contracts falling due during the
period. We have received continued recognition from leading
customers and analysts that we have a globally leading and relevant
set of customer engagement products.
The arrival of the pandemic in the final months of the year saw
us take decisive action. Through prudent cost management and our
teams' ability to identify opportunities for future revenue
generation amongst the rapidly changing environment, we have
managed to limit the short-term impact on our business whilst
positioning ourselves for continued strong growth in the medium and
longer term.
Many exciting and substantial opportunities are available to us,
not least the potential for expansion in North America where our
sales pipeline continues to expand. As one of the established
leaders in our industry, with a high proportion of recurring
revenues, we are confident of gathering further momentum."
An analyst call will be held at 11.30am today. If you would like
the details for this call, please contact Alma PR at
IMImobile@almapr.co.uk
The Group will also be hosting a webinar for retail investors at
10.30am on 5 August 2020. If you would like to register for this
presentation, please contact IMImobile@almapr.co.uk .
Cautionary statement
This announcement contains forward-looking statements that are
based on current expectations or beliefs, as well as assumptions
about future events. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements often use words such
as anticipate, target, expect, estimate, intend, plan, goal,
believe, will, may, should, would, could, is confident, or other
words of similar meaning. Undue reliance should not be placed on
any such statements because they speak only as at the date of this
document and, by their very nature, they are subject to known and
unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and IMImobile's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements.
There are a number of factors which could cause actual results
to differ materially from those expressed or implied in
forward-looking statements. Among the factors that could cause
actual results to differ materially from those described in the
forward-looking statements are; increased competition, the loss of
or damage to one or more key customer relationships, the outcome of
business or industry restructuring, changes in economic conditions,
currency fluctuations, changes in laws, regulations or regulatory
policies, developments in legal or public policy doctrines,
technological developments, the failure to retain key management,
or the key timing and success of future acquisition opportunities
or major investment projects.
IMImobile undertakes no obligation to revise or update any
forward-looking statement contained within this announcement,
regardless of whether those statements are affected as a result of
new information, future events or otherwise, save as required by
law and regulations.
For further information, please contact:
IMImobile PLC c/o Alma PR
Jay Patel, Group Chief Executive Tel: +44 (0)20 3405 0205
Officer
Mike Jefferies, Group Chief
Financial Officer
Alma PR Tel: +44 (0)20 3405 0205
Rebecca Sanders-Hewett IMImobile@almapr.co.uk
Susie Hudson
Harriet Jackson
Investec Bank - Nominated Adviser Tel: +44 (0)20 7597 5970
and Joint Broker
Henry Reast
Virginia Bull
Tejas Padalkar
N+1 Singer - Joint Broker Tel: +44 (0)20 7496 3000
Tom Salvesen
Justin McKeegan
Iqra Amin
About IMImobile PLC
IMImobile is a communications software provider whose solutions
enable enterprises to automate digital customer communications and
interactions to improve customer experience and reduce operating
costs.
IMImobile's enterprise cloud communications software platform
orchestrates customer interactions, connecting existing business
systems with digital communications channels. Organisations that
trust us to deliver smarter digital customer engagement include
Hermes, Centrica, AA, O2, EE, BT, Walgreens, Tracfone, Ooredoo,
Best Buy, Express, three of the major retail banks in the UK and
public-sector organisations globally.
IMImobile is headquartered in London with offices across the UK,
Hyderabad, Toronto, Boca Raton, Dubai and Johannesburg and has over
1,100 employees worldwide. IMImobile is quoted on the London Stock
Exchange's AIM market with the TIDM code IMO.
Chairman's Statement
I am delighted to introduce these results, which reflect another
year of strong delivery against our strategy. The year to 31 March
2020 was another period where the Group made notable financial and
operational progress. The Company has continued to maintain strong
positive momentum for the last six years, with a revenue CAGR(1) of
26% and gross profit CAGR(1) of 19% since listing. Pleasingly,
growth has been derived from all geographic regions and driven by
adoption of our core cloud communication product set.
During the period, we took the decision to separate the
activities of our Group into two units;
1. Cloud communications products, platforms and services, which
contributed 82% of Group gross profit, grew by more than 38% year
on year
2. Operator value added services (VAS) and mobile payments,
which contributed 18% of Group gross profit, declined by 8% year on
year
The business model and market dynamics are different for each
unit. There are significant variations in how we go to market and
serve our customers for each set of products. The reorganisation
allows us to capitalise better on market opportunities and enables
us to have greater focus on product and service innovation.
Probably the most significant development in the year was our
milestone acquisition of US-based company, 3C. The addition of a
new blue-chip, enterprise customer base, an experienced leadership
team and approximately 100 colleagues to our North American
business unit significantly progresses our ambitions to further
accelerate the growth of our operations in the region. The
combination has also given the Group a leadership position in
deploying rich communication services (RCS) business messaging
solutions for large brands and enterprises globally.
In other markets we have also made good progress in maintaining
existing customer relationships and winning new clients across
multiple industry sectors. Continued investment in R&D evolves
our product, platform and service offering and we have seen our
strategy validated through the winning of several competitive new
opportunities across the regions in which we operate.
COVID-19
Following a strong year, we have had to adapt to the challenges
presented by the COVID-19 pandemic. Whilst recognising that this is
an unprecedented challenge for our colleagues, customers, partners,
shareholders and the global economy, we are pleased with the
efficacy of our response so far and the resilience of the business
performance.
We have adapted to remote working very quickly, with over 1,100
colleagues moving to work from home in just a few days. Our
business continuity plans have worked well, as expected, with the
Group able to support emergency communications initiatives for
customers at very short notice.
The Company took swift action in the early days of the pandemic,
introducing a hiring freeze and early travel restrictions as well
as temporary salary reductions, including 33% for the Board. We
also took the prudent step of strengthening the balance sheet
through the share placing to existing and new institutional
shareholders announced on 9 April 2020, raising gross proceeds of
GBP22.2m.
More recently, we have begun to see a steady recovery in the
activity of clients in the worst impacted sectors, alongside
continued momentum in our work with core sectors such as banking,
mobile operators and logistics. In line with these encouraging
developments, the Company has begun to return furloughed employees
to the business and since 1 July 2020, has returned all salaries,
except those of the Board, to normal levels. The Company will also
review the repayment of salary reductions based on its full year
2021 performance.
Our people
During the year we have strengthened our exceptional team
through both hiring and the acquisitions of 3C and Rostrvm, and I
am confident that we have the right people to continue to deliver
on our strategic objectives in all regions in which we operate.
On behalf of the Board, I want to acknowledge the contribution
made by all members of the growing IMImobile family. The team have
delivered another strong set of results, and risen to the
challenges of lockdown and remote working. I am incredibly grateful
for the ongoing commitment and hard work of our people.
Summary and Outlook
IMImobile is now a large, diversified business and one of the
established leaders in our industry. We currently employ over 1,100
staff and have 21 offices around the World. During the reporting
period, we took another key step on that journey, with the
acquisition of 3C which has provided us with a strong foothold in
the US, our largest addressable growth market. This strategic move
has been further validated by the signing of our largest contract
to date with one of the world's largest retailers.
Notwithstanding the challenges associated with COVID-19, our
response has been decisive and the business has performed strongly.
In the longer term, we anticipate that the significant disruption
caused will drive and accelerate uptake of our leading technology
and services as large global enterprises increasingly adopt digital
transformation initiatives to improve customer engagement
strategies. We have an excellent team, cutting-edge technology and
products, good brand penetration in all our chosen markets and a
significant growth opportunity in North America.
[1] Compound annual growth rate, calculated against revenue of
GBP43.4m and gross profit of GBP27.9m in the year ended 31 March
2014
John Allwood
Non-Executive Chairman
Chief Executive's Report
We have delivered another very strong trading performance over
the year to 31 March 2020 with growth across all sectors and
regions for our core cloud communication platform, products and
services.
We achieved numerous new client wins, enhanced partner
acquisition and achieved the renewal of all major contracts falling
due during the period. Consequently, we have delivered strong gross
profit growth of 26% (7% organic) and adjusted EBITDA growth of
13%.
It has also been a particularly strong period of strategic and
commercial progress for the Group's cloud communication product
set, which in the period represented 82% of Group gross profit. The
broader market for cloud-based communication products
(Communication Platform as a Service - "CPaaS") continues to grow
strongly with increased global adoption, reflected in our 'cloud
communication products' business growing organically by 15% during
the period.
We have also made extremely pleasing further progress in the
North American market, following the landmark acquisition of
US-based company, 3C, in August 2019 which provided solid
foundations for US expansion and a very significant new client win
in the retail sector. There is a strong and growing pipeline of
growth opportunities in the region and we remain excited by the
significant potential in North America in the years ahead.
Growth strategy
Continued delivery
The Company has consistently delivered on its long-term growth
strategy which focuses on four clear objectives:
1. To grow our share of customer interactions within existing
clients;
2. To accelerate market penetration of our technologies through
partnerships;
3. To be at the forefront of introducing new innovative customer
engagement technologies; and
4. To leverage acquisitions for market distribution.
The Group is able to progress against these aims due to the
strength of its broad product offering, its owned IP and proven
ability to innovate, alongside its international presence and
experienced global management team.
Interactions
Developing relationships with existing customers
One of our key strategies for growth involves up-selling new
products, channels or technologies to existing customer accounts.
During the year to 31 March 2020, the number of clients that
provide more than GBP500k per annum revenue increased to 46 (40 in
FY19) and clients with revenues between GBP100k per annum and
GBP500k per annum increased to 118 (83 in FY19).
For example, we have successfully grown our share of
interactions for a major UK operator, a longstanding existing
client. During the year, we have launched new channels for this
mobile operator, including RCS and email, and expanded our services
across their sub-brands. This has resulted in the number of
customer interactions within that account increasing by more than
double. We have also increased our share of interactions within an
existing client in the logistics sector by more than double in the
last year by launching new customer journeys, providing them with
an additional channel (in-app push) and due to an increase in
parcels being sent during the lockdown period.
The focus since the acquisition of 3C last year has been to
introduce the Group's core cloud communication product set to 3C's
largest customers and several are now being progressed in order to
grow the share of customer interactions within those existing
accounts.
Partnerships
Reaping the reward of further investment in partnerships
We have continued to invest in our partnerships programme in
order to target new enterprise clients and sectors and have
expanded the partnerships team during the last year. We have
strengthened existing partnerships during the period, notably
expanding our product offering with BT and generating a number of
pipeline opportunities as well as across broader geographies with
Scandinavian mobile operator, Telia, who have added the Textlocal
product to their reseller agreement.
We have also secured new partnerships with Communisis, a print
and messaging business, who want to digitise communications for
their customers and fast-growing cloud contact centre businesses.
We have also increasingly partnered with global network
infrastructure and systems integrators on specific commercial
opportunities.
Innovation
Building on the Group's reputation for innovation
In the past year, we have seen our clients start to realise the
potential of and to implement new, richer communication channels
such as RCS, WhatsApp Business and Apple Business Chat as part of
their customer communication strategies. The momentum for large
consumer-facing businesses starting to use these channels and see
their improved customer engagement rates continues to grow and we
have a strong pipeline of opportunities from existing clients.
We have deployed RCS for major mobile operator clients across
Europe, North America and a new mobile operator client in Brazil as
well as for enterprises such as Pizza Hut, Sweaty Betty, Best Buy
and Walgreens. In addition, we have launched Apple Business Chat
for Vauxhall, npower, O2 and our largest banking client. WhatsApp
Business has also been a popular channel to provide customer
service amongst our enterprise clients including Hyundai, Skoda,
Britannia and two banking clients.
Furthermore, in October 2019, we launched eClinic to support the
NHS in meeting their long-term plan of offering 30 million virtual
appointments by 2022. eClinic is powered by our WebRTC solution,
IMIassist, which enables enterprises to transform their customer
interactions with real-time video assistance. eClinic is currently
being used by three NHS trusts in the UK and, due to the impact of
COVID-19, has generated a number of opportunities with clients and
partners across international markets. We were also pleased that
eClinic was recognised at the 2020 National Innovation Awards,
winning the 'Service Personalisation' category.
Acquisitions
Two strategically important acquisitions completed
During the period, we successfully completed two acquisitions.
We acquired US-based company, 3C, in order to provide us with
additional distribution capabilities in North America, a strong
client base of enterprise clients and to consolidate our global
leadership position in RCS Business Messaging. Since acquisition,
the North America team have introduced the Group cloud
communication products over a series of twenty workshops to
existing 3C strategic accounts. These have yielded an immediate
pipeline of opportunities in the region.
Most recently, we acquired UK-based, cloud contact centre
provider, Rostrvm. The core reason for this acquisition was to
provide the Group with additional voice capabilities to enhance its
cloud contact centre offering. The technical integration work has
now been substantially completed and we have successfully sold the
enhanced contact centre product and we have a number of other
opportunities moving forward.
We have completed a number of successful acquisitions since IPO
in 2014 and continue to explore strategic acquisitions that meet
our criteria, which has remained the same in that we look to
acquire businesses that provide similar communication software and
services as the Group and have strong long-term relationships with
major blue chip clients therefore providing an opportunity to
upsell the Group's broader portfolio of capabilities.
Trading performance to 31 March 2020
All regions delivered double digit gross profit growth or more
for the core communication product set
This year, we have more formally reorganised the business into
two differentiated areas based upon their respective product sets.
The core area of the business is 'Cloud Communication Products'
which in the period represented 82% of Group gross profit at year
end. The remainder of the business is referred to as 'Operator VAS
and Mobile Payments' which represented 18% of the business in the
period. The Board considers that gross profit is the key
operational measure of performance in the business.
Cloud Communication Products - 82% of Group gross profit
This business unit focuses on a core set of customer
communication products, targeted at large enterprises and
supplemented by propositions for developers and small and
medium-sized business (SMB) customers.
Europe - gross profit up 13% to GBP37.8m (2019: GBP33.3m)
The region has delivered organic gross profit growth of 12%,
driven by new client wins and cross selling to existing accounts of
additional cloud communications products. In the UK, the telco
business continues to perform well, and we have launched RCS
campaigns for three of the major mobile operators. The enterprise
business has also seen new client wins and upsell of additional
products across the banking, utilities and public sector.
The healthcare division of the Group, Healthcare Communications,
which provides communication products to NHS trusts, signed 11 new
trusts during the period, prior to the impact of COVID-19 and
implementation of the national lockdown, and experienced a 27%
growth in year on year volumes. As previously mentioned, we have
launched a new eClinic product for the NHS to enable clinicians to
have video consultations with patients and we anticipate that the
COVID-19 outbreak may accelerate the need for this type of product
and general digital transformation initiatives within the NHS.
We have also seen progress across mainland Europe, where our
enhanced RCS solution has provided us with the opportunity to build
more commercial opportunities with mobile operators as messaging
standards evolve. We have also renewed a significant contract with
one of the leading Spanish mobile operators during the period.
The business has also invested further in partnerships and
signed, through competitive tender processes, new partnerships with
telecom and business services companies.
We are pleased to see continued good momentum at the start of
the new financial year and there is a strong pipeline of new
business opportunities in the region.
Americas - gross profit up 152% to GBP18.4m (2019: GBP7.3m)
The region continues to make good progress, achieving 10%
organic gross profit growth for the cloud communications products
set. The Board is significantly encouraged of the growth
opportunity presented having been selected by one of the world's
largest retailers for its CPaaS offering ('IMIconnect') following a
competitive tender process. This project is now in deployment and
provides clear evidence of the relevance of the product suite in
North America, the largest addressable market for the Group's
product set.
In August 2019, the Company acquired 3C, a US cloud-based
business with a leading RCS offering, and the integration of that
acquisition is now substantially complete, with the consolidation
of all North American operations under one team and management
structure as well as common business systems and processes. The
focus since acquisition has been to introduce the Group's
communication product set to 3C's customers and, as aforementioned,
we have held over twenty workshops with existing customers whereby
several opportunities are now being progressed. We remain excited
by the growth potential of the North American market moving
forward.
Middle East & Africa (MEA) - gross profit up 29% to GBP4.4m
(2019: GBP3.4m)
The region has experienced a solid trading performance enhanced
by the growth of new messaging channels and the implementation of
automation technologies. We have had a significant number of new
contract wins across the banking, mobile operator and utilities
sectors during the period for the Group's cloud communication
products set.
These include significant new contracts for banking clients
including Absa, Old Mutual and the largest bank in the Middle East.
We have also signed new contracts with the leading mobile operator
in the Middle East; Dubai Electricity & Water Authority (DEWA)
and TV services company, Multichoice.
Asia-Pacific (APAC) - gross profit up 45% to GBP4.0m (2019:
GBP2.8m)
The region has experienced good momentum selling the Group's
cloud communications products. We have seen a significant
acceleration in the number of customers wanting to use WhatsApp
Business in the region due to the reach and popularity of the
channel in specific markets. We have successfully onboarded a
number of clients across the automotive, retail and banking sectors
onto IMIconnect to enable them to communicate with their customers
via WhatsApp.
The SMB business in the region has also continued to perform
well. The self-serve Textlocal platform has added approximately
1,000 new customers per month and sent over 1.5 billion SMS
messages during the period which is a growth of 59% year on
year.
Operator VAS & mobile payments - 18% of Group gross
profit
As previously disclosed, the Group's operator VAS and mobile
payments business experienced a decline of 8% in line with
management expectations. Excluding the acquired payments business
in the Americas region, contributing gross profit of GBP1.1m, gross
profit declined by 15%.
The mobile payments business in the UK continues to experience
declines due to regulations and changes in consumer habits, with
gross profit in the region falling by 35% from GBP4.0m to
GBP2.6m.
In APAC, gross profit was flat at GBP6.0m reflecting growth from
the usage of IMIdigital for self-care applications for mobile
operator portals offsetting the one-off licence fees achieved last
year. In MEA, gross profit was down 14% from GBP5.7m to GBP4.9m,
with continued decline in the revenues for certain content
services. However, our long term, trusted relationships with
leading telecom groups does provide a foundation for future
growth.
Market developments
Customers increasingly moving to rich messaging channels and
self-service
Technology has and will continue to fundamentally change how
businesses engage with their customers. New communication channels
and the possibilities of intelligent automation allow businesses to
improve customer experience and reduce operational costs.
However, many large, consumer-facing businesses across all
sectors face challenges in meeting customer expectations for
seamless interactions; often held back by existing legacy systems,
siloed data and long development cycles. As a result, businesses
are increasingly leveraging CPaaS software to manage their customer
interactions across a growing number of channels and touchpoints.
With customer engagement becoming paramount to business success,
the CPaaS market is predicted to grow to more than $17.2 billion by
2023, representing a CAGR of nearly 40% from $3.3 billion in
2018.(1) We have always believed in a world in which consumers are
delivered great customer experiences through continuous, seamless
engagement and our CPaaS offering, IMIconnect, helps large
enterprises achieve this goal.
In the past year, we have seen both new and existing clients
realise the potential of new channels such as RCS, WhatsApp
Business and Apple Business Chat to transform their business to
customer interactions. We are one of only a few official technology
providers approved by Google, Apple and Facebook to provide
blue-chip companies with these channels. Following the 3C
acquisition last year, the Group is now the global leader for RCS
Business Messaging and we anticipate that this will be a key area
for growth moving forward as the addressable number of RCS-enabled
handsets increases.
Following the COVID-19 outbreak towards the end of the period
and throughout the current financial year to date, the Company has
seen increased demand from the market for certain remote
communication solutions. We are confident that this trend in
increased demand will continue over the long term, and that the
crisis will ultimately lead to an acceleration in digital
transformation initiatives within enterprises, giving us great
optimism for the future.
[1] IDC, Worldwide Communications Platform-as-a-Service
Forecast, 2019-2023,
https://www.idc.com/getdoc.jsp?containerId=US45534219.
Products, technology and infrastructure
Continuous innovation to maintain our leading position
For B2C companies, transforming customer experience (CX) has
become a strategic imperative. Delivering great CX requires
customer interactions, on any channel, to be seamlessly connected
to existing backend systems and orchestrated across departments,
business units and geographies.
Our integrated, yet modular Customer Interaction Management
(CIM) suite enables businesses to manage, automate and orchestrate
customer interactions - from simple communication flows to complex
multi-step interactive journeys. Our CIM products cater to the
needs of a wide set of user personas in an enterprise -
communications APIs (application programming interfaces) and SDKs
(software development kits) for developers, low-code platforms for
technical users and pre-packaged application software for users in
marketing, contact centres and operations. The modular design and
interoperability across products enable flexibility in how clients
use our products, starting with a single solution or use case and
upgrading to the full CIM suite over time.
Providing rich application and platform functionality to enable
the end-to-end management, orchestration and automation of customer
interactions remains central to our strategy. This includes
providing developers access to communication channels but is not
limited to that, as is the case with most pure play CPaaS
providers. Our strategy is validated by a leading industry analyst
who commented that rather than "the usual catalog of SDKs and APIs,
the company ... is focused around end-to-end automation of customer
journeys across digital touch points".
We continue to invest in our products suite as we lead the way
in shaping the evolution of the customer interaction management
category. Key roadmap themes include:
-- Deeper cross-product integrations, particularly in the areas
of product operations, monitoring & alerting, troubleshooting,
SLA (Service Level Agreement) management and license administration
-- Broader AI-enrichment across products, not just in functional
capabilities, but with in-life service management as well
-- Multi-cloud support as we adapt our products to run on Microsoft
Azure in addition to Amazon Web Services that we already
support
-- Richer out-of-the-box data visualisation and descriptive
analytics capabilities that enable ongoing improvements
to customer interactions and customer journeys
-- Self-serve product operations and administration consoles
and interfaces to help us scale our go-to-market through
channel partners
Organisation and systems
Progressing integration of acquisitions and enabling global
collaboration
The Group has continued to grow in the last year, with the
landmark US acquisition of 3C as well as the acquisition of UK
contact centre provider, Rostrvm. The integration of both
acquisitions is now substantially complete with all global
employees collaborating using internal systems such as Microsoft
Teams, SharePoint and Workplace. These systems also enabled us to
transition all global employees to remote working due to the
COVID-19 crisis. We are also currently implementing a global HR
system for all employees to centrally manage
onboarding/offboarding, recruitment and performance management
processes.
As previously mentioned, we have also reorganised the business
into two separate business units based upon the product set. The
'Cloud Communications Products' and 'Operator VAS and mobile
payments' business units will now operate independently with
separate roadmaps and management teams. This reorganisation will
enable us to have a greater focus on product and service innovation
and further capitalise on market opportunities.
Current trading and Outlook
As previously reported in our announcement on 9 July, the Group
has delivered a resilient performance in Q1 FY21 despite the
operational challenges presented by the COVID-19 pandemic.
Notwithstanding the impact to businesses globally, we strongly
believe that current trends will benefit IMImobile, evidenced by
Group gross profit being up approximately 20% year-on-year for the
quarter, with the cloud communications product set showing
year-on-year gross profit growth of over 30%.
Following period end, the Group has seen clear positive momentum
across its regions. Alongside seeing a steady recovery of client
activity in the worst-impacted industry sectors since late May
2020, the Group has been focused on strategic deployments, as
existing and new blue-chip clients look to accelerate their
adoption of digital communication strategies, that will help drive
future revenues. Performance in North America, the largest
addressable and growth market for the Group's product set,
continues to be encouraging, with new strategic deployments for
large US retailers having continued during the first quarter.
As previously disclosed, the results for Q1 FY21, together with
a good and growing visibility of earnings, underpins the Company's
confidence in achieving good year-on-year gross profit growth,
subject to the impact of any second wave of the pandemic, including
further organic growth in the cloud communications products
business, in the full year to 31 March 2021.
With an established leading position in a number of our markets,
and substantial opportunities for further growth, we are at an
exciting juncture for the business as companies increasingly focus
on digital transformation initiatives for customer engagement. Our
execution of strategy is proven, and we look forward to delivering
yet another year of growth ahead.
Jay Patel
Group Chief Executive
Financial Review
Group performance at a glance
Year ended 31 March 2020 2019 Growth
GBP000 GBP000
Revenue 171,187 142,731 20%
---------------------------------------- -------- ---------- -------
Gross profit 79,107 62,573 26%
Gross margin 46.2% 43.8%
---------------------------------------- -------- ---------- -------
Adjusted EBITDA(1) 21,597 19,069(2) 13%
Adjusted EBITDA margin(3) 27.3% 30.5%
---------------------------------------- -------- ---------- -------
Operating profit 4,610 995 363%
---------------------------------------- -------- ---------- -------
Adjusted operating profit(1) 15,960 14,078(2) 13%
---------------------------------------- -------- ---------- -------
Profit before tax 3,130 710 341%
---------------------------------------- -------- ---------- -------
Adjusted profit before tax(1) 14,585 13,647(2) 7%
---------------------------------------- -------- ---------- -------
Profit/(loss) after tax 2,028 (1,312) 255%
---------------------------------------- -------- ---------- -------
Adjusted profit after tax(1) 12,272 10,756(2) 14%
---------------------------------------- -------- ---------- -------
Diluted EPS 2.5p (1.9p) 229%
---------------------------------------- -------- ---------- -------
Adjusted diluted EPS(1) 15.5p 15.1p 3%
---------------------------------------- -------- ---------- -------
Cash at period end 25,089 13,247 89%
---------------------------------------- -------- ---------- -------
Bank borrowings (excluding capitalised
borrowing costs) 47,328 20,848 127%
---------------------------------------- -------- ---------- -------
[1] Adjusted for costs which management do not consider reflect
underlying business performance - see note 7 for details of
adjusted performance measures, adjusting items and a reconciliation
of statutory results to adjusted results.
2 Restated prior year adjusted performance measure had IFRS 16
been adopted from 1 April 2018
3 Adjusted EBITDA margin calculated as adjusted EBITDA divided by gross profit.
Key performance indicators (KPIs)
This section sets out the KPIs for the Group during the year
ended 31 March 2020.
Revenue and gross profit
For the year ended 31 March 2020 total revenue increased by 20%
to GBP171.2m (2019: GBP142.7m) and gross profit increased by 26% to
GBP79.1m (2019: GBP62.6m). The Board considers that gross profit is
the key operational measure of performance in the business.
Group geographical split of revenues and gross profit by
operating division is as follows:
Revenue
Year ended 31 March 2020 2019 Growth
GBP000 GBP000 / (decline)
---------------------------------- -------- -------- -------------
Cloud communication products
---------------------------------- -------- -------- -------------
Europe 107,001 94,400 13%
---------------------------------- -------- -------- -------------
Americas 25,787 10,498 146%
---------------------------------- -------- -------- -------------
Asia-Pacific 8,844 7,216 23%
---------------------------------- -------- -------- -------------
Middle East & Africa 9,250 7,897 17%
---------------------------------- -------- -------- -------------
Total 150,882 120,011 26%
---------------------------------- -------- -------- -------------
Operator VAS and mobile payments
---------------------------------- -------- -------- -------------
Europe 4,535 6,207 (27%)
---------------------------------- -------- -------- -------------
Americas 1,281 89 1,341%
---------------------------------- -------- -------- -------------
Asia-Pacific 9,163 9,160 0%
---------------------------------- -------- -------- -------------
Middle East & Africa 5,326 7,264 (27%)
---------------------------------- -------- -------- -------------
Total 20,305 22,720 (11%)
---------------------------------- -------- -------- -------------
Total 171,187 142,731 20%
---------------------------------- -------- -------- -------------
Gross profit
Year ended 31 March 2020 2020 2019 2019 Growth
/ (decline)
GBP000 % GBP000 %
---------------------------------- -------- ------ -------- ------ -------------
Cloud communication products
---------------------------------- -------- ------ -------- ------ -------------
Europe 37,760 35.3% 33,296 35.3% 13%
---------------------------------- -------- ------ -------- ------ -------------
Americas 18,364 71.2% 7,276 69.3% 152%
---------------------------------- -------- ------ -------- ------ -------------
Asia-Pacific 4,012 45.4% 2,774 38.4% 45%
---------------------------------- -------- ------ -------- ------ -------------
Middle East & Africa 4,386 47.4% 3,389 42.9% 29%
---------------------------------- -------- ------ -------- ------ -------------
Total 64,522 42.8% 46,735 38.9% 38%
---------------------------------- -------- ------ -------- ------ -------------
Operator VAS and mobile payments
---------------------------------- -------- ------ -------- ------ -------------
Europe 2,600 57.3% 4,013 64.6% (35%)
---------------------------------- -------- ------ -------- ------ -------------
Americas 1,069 83.5% 62 69.7% 1,626%
---------------------------------- -------- ------ -------- ------ -------------
Asia-Pacific 6,012 65.6% 6,051 66.1% (1%)
---------------------------------- -------- ------ -------- ------ -------------
Middle East & Africa 4,904 92.1% 5,712 78.6% (14%)
---------------------------------- -------- ------ -------- ------ -------------
Total 14,585 71.8% 15,838 69.7% (8%)
---------------------------------- -------- ------ -------- ------ -------------
Total 79,107 46.2% 62,573 43.8% 26%
---------------------------------- -------- ------ -------- ------ -------------
Cloud communication products
The cloud communication products contributed 82% of the Group's
gross profit and grew by 38% in the year. When excluding the impact
of acquisitions gross profit grew by over 15% in the year. All
regions delivered double digit organic gross profit growth from
cloud communications products.
Gross margin increased from 38.9% to 42.8% as a result of the
increase in the relative contribution from the higher margin
Americas region and improving margins from APAC and MEA which grew
as a result of new higher margin messaging channels and increased
mix in software licenses in those regions.
Operator VAS and mobile payments
18% of the Group's gross profit comes from Operator VAS and
mobile payments. Gross profit from this unit fell by 8% in the
year. Excluding the impact of acquisitions gross profit declined by
15%.
Gross margin increased from 69.7% to 71.8% as a result of
acquired line of business from the 3C acquisition and reduced
content related costs in the MEA region.
Adjusted operating costs(1)
Adjusted operating costs(1) in the year were GBP63.1m (2019:
GBP48.5m(2) ). This reflects the full year inclusion of Impact
Mobile and ExpressPigeon and the post-acquisition costs of
3Cinterative and Rostrvm as well as additional investment in
product development, partnerships and sales and marketing across
the Group.
[1] Adjusted for costs which management do not consider reflect
underlying business performance - see note 7 for details of
adjusted performance measures, adjusting items and a reconciliation
of statutory results to adjusted results.
2 Restated prior year adjusted performance measure had IFRS 16
been adopted from 1 April 2018
Adjusted EBITDA(1)
Adjusted EBITDA(1) for the year ended 31 March 2020 was GBP21.6m
(2019: GBP19.1m(2) ) representing an increase of 13% against the
prior year mainly due to the organic growth in the Europe and
Americas region and the full year inclusion of Impact Mobile and
the post-acquisition contribution of 3C. Due to the difficulty in
identifying incremental costs arising across the Group following
acquisitions, adjusted EBITDA(1) is not assessed at an organic
level.
Client concentration
The number of clients that provide more than GBP500k p.a.
revenue increased to 46 (2019: 40) and clients with revenues
between GBP100k p.a. and GBP500k p.a. increased to 118 (2019:
83).
Adjusted 'cash generated from operations'(1) and cash
conversion(3)
Adjusted 'cash generated from operations'(1) was GBP24.0m (2019:
GBP18.0m(2) ) and represents an operating cash flow conversion(3)
of 111% of adjusted EBITDA(1) (2019: 94%(2) ).
Group cash flow and working capital
During the year the Group raised GBP19.6m (after expenses) from
a share placing and agreed new UK bank loan facilities with Silicon
Valley Bank and HSBC, increasing total bank borrowings by GBP26.8m
after principal repayments in the year, which were used to fund the
acquisitions of 3C and Rostrvm. Year-end cash and cash equivalents
were GBP25.1m (2019: GBP13.2m) and total bank borrowings (excluding
capitalised borrowing costs) at 31 March 2020 were GBP47.3m (2019:
GBP20.8m). Cash less bank debt was GBP22.2m (2019: GBP7.6m).
Group working capital is made up as follows:
As at 31 March 2020 2019
GBP000 GBP000
-------------------------------------------------- --------- ---------
Cash and cash equivalents 25,089 13,247
Bank borrowings (excluding capitalised borrowing
costs) (47,328) (20,848)
Trade and other receivables 49,609 50,615
Trade and other payables (excluding contract
liabilities) (48,313) (44,678)
-------------------------------------------------- --------- ---------
Net working capital less borrowings (20,943) (1,664)
-------------------------------------------------- --------- ---------
Trade receivables and payables include "pass through" amounts
generated from mobile payment transactions. The receivables are
from mobile operators and payables to customers who use IMImobile's
payment APIs. The gross value of these transactions is excluded
from revenues and cost of sales as the Group accounts only for the
commission earned on such transactions within revenue as it is not
the principal obligor in the arrangement. The value of pass through
transactions included in trade and other receivables at 31 March
2020 is GBP2.1m (2019: GBP3.3m) and GBP4.4m (2019: GBP5.1m) in
trade and other payables.
The value of trade and other receivables included from the new
acquisitions in the year, 3C and Rostrvm, at 31 March 2020 is
GBP4.4m. Of the remaining movement, trade receivables has decreased
by GBP6.9m primarily due to the timing of receipts from a major
customer (see note 10), higher monthly recurring revenues in Europe
compared to the previous year offset by the write off of debt due
from an operator VAS customer in the Middle East (see note 10)
contributed to a GBP0.5m increase in contract assets and pass
through transactions have decreased by GBP1.2m, as referred to
above. The Group made a loan of GBP1.0m inclusive of accrued
interest to the management of IMImobile North America Inc, secured
against the shares issued in November 2018 as consideration when
the Group exercised its call option to acquire the remaining 20%
share of IMImobile North America Inc. The remaining movement is
mainly attributable to the GBP1.4m increase in the tax
receivable.
An increase in cost of sales, as a result of higher monthly
recurring revenues in the Europe & Americas region compared to
the previous year, has contributed GBP1.0m to the overall increase
in trade and other payables (excluding deferred income), offset by
the reversal of GBP1.0m of accrued costs related to the write off
of debt due from an operator VAS customer in the Middle East (see
note 10). Pass through transactions have decreased by GBP0.7m, as
referred to above. The value of trade and other payables (excluding
deferred income) included from the new acquisitions in the year, 3C
and Rostrvm, at 31 March 2020 is GBP4.9m. The remaining movement is
mainly attributable to the decrease in the put option on the
acquisition of IMImobile South Africa (formerly Archer).
Profit after tax and adjusted profit after tax(1)
Profit after tax was GBP2.0m (2019: loss of GBP1.3m) after the
net of tax impact of acquisition costs of GBP3.3m (2019: GBP0.9m),
acquisition-related share-based payment charges of GBP0.9m (2019:
GBP8.1m), share-based payment charges of GBP1.6m (2019: GBP0.7m)
and amortisation of acquired intangibles of GBP4.5m (2019:
GBP2.4m). Adjusted profit after tax(1) was GBP12.3m (2019:
GBP10.8m) which is 14% higher than the prior year.
Earnings/loss per share
Diluted earnings per share was 2.5p (2019: loss per share of
1.9p). Diluted adjusted EPS(1) increased by 3% to 15.5p (2019:
15.1p).
Other financial information
Group taxation
The tax charge for the year was GBP1.1m (2019: GBP2.0m). The
adjusted effective rate of tax(4) for the year was 15.9% (2019:
21.1%).
[1] Adjusted for costs which management do not consider reflect
underlying business performance - see note 7 for details of
adjusted performance measures, adjusting items and a reconciliation
of statutory results to adjusted results.
2 Restated prior year adjusted performance measure had IFRS 16
been adopted from 1 April 2018
3 Cash conversion is defined as adjusted cash generated from
operations (see note 7) as a percentage of adjusted EBITDA
4 Adjusted tax as a proportion of adjusted profit before tax, as
reconciled in note 7.
Other intangible assets
During the year ended 31 March 2020 the Group capitalised
GBP6.0m of development costs (2019: GBP6.3m), of which GBP5.5m
(2019: GBP5.3m) were internally generated, and acquired GBP25.4m of
intangible assets as a result of the acquisitions of 3C and
Rostrvm. In addition to this, expenditure during the year on
software and trademarks and licenses was GBP0.3m (2019:
GBP0.2m).
Property, plant and equipment
Capital expenditure on property, plant and equipment during the
year was GBP0.7m (2019: GBP1.2m) and the Group acquired GBP0.8m of
property, plant and equipment as a result of the acquisitions of 3C
and Rostrvm. The adoption of IFRS 16 resulted in right-of-use
assets of GBP2.8m.
Goodwill
Goodwill held at 31 March 2020 was GBP70.0m (2019: GBP43.6m)
which increased following the acquisitions of 3C and Rostrvm.
Deferred tax
Deferred tax assets at 31 March 2020 were GBP0.7m (2019:
GBP0.6m) and deferred tax liabilities at 31 March 2020 were GBP7.1m
(2019: GBP3.9m) including the amount recognised on identifiable
intangible assets acquired in 3C and Rostrvm.
Non-current liabilities
As well as the deferred tax liabilities and bank borrowings
above, the provision for defined benefit gratuity obligation
increased to GBP1.3m (2019: GBP1.0m) and the provision for
contingent consideration due in more than one year increased to
GBP4.9m following the acquisition of 3C. The adoption of IFRS 16
resulted in long term lease liabilities of GBP1.2m.
Consolidated Income Statement
For the year ended 31 March 2020
Year ended
Year ended 31 March
Notes 31 March 2020 2019
GBP000 GBP000
Revenue 2, 4 171,187 142,731
Cost of sales (92,080) (80,158)
Gross profit 4 79,107 62,573
Operating costs:
Other operating costs (57,510) (44,558)
Depreciation and amortisation (10,977) (7,085)
Share-based payment charge 14 (2,172) (8,899)
Acquisition costs (3,838) (1,036)
Operating profit 4,610 995
Finance income 145 295
Finance cost (1,625) (580)
Profit before tax 3,130 710
Tax 5 (1,102) (2,022)
Profit/(loss) for the year 2,028 (1,312)
Profit/(loss) for the year attributable
to:
Equity holders of the parent company 1,972 (1,255)
Non-controlling interest 56 (57)
Profit/(loss) for the year 2,028 (1,312)
Year ended
Year ended 31 March
Notes 31 March 2020 2019
Basic earnings/(loss) per share 6 2.7p (1.9p)
Diluted earnings/(loss) per share 6 2.5p (1.9p)
Year ended
Year ended 31 March
Notes 31 March 2020 2019
GBP000 GBP000
Adjusted EBITDA(1) 7 21,597 19,069(2)
Year ended
Year ended 31 March
Notes 31 March 2020 2019
Adjusted basic earnings per share(1) 6 17.0p 16.7p
Adjusted diluted earnings per share(1) 6 15.5p 15.1p
[1] Adjusted for costs which management do not consider reflect
underlying business performance - see note 7 for details of
adjusted performance measures, adjusting items and a reconciliation
of statutory results to adjusted results.
2 Restated prior year adjusted performance measure had IFRS 16
been adopted from 1 April 2018
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2020
Year ended Year ended
31 March 31 March
2020 2019
GBP000 GBP000
Profit/(loss) for the year 2,028 (1,312)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations
Equity holders of the parent company (1,609) (284)
Non-controlling interest 140 69
Net actuarial losses recognised on defined
gratuity plan
Equity holders of the parent company (145) (9)
Non-controlling interest - -
Other comprehensive/(loss) for the year (1,614) (224)
Total comprehensive income/(loss) for the
year 414 (1,536)
Total comprehensive income/(loss) for the
year attributable to:
Equity holders of the parent company 218 (1,548)
Non-controlling interest 196 12
Total comprehensive income/(loss) for the
year 414 (1,536)
The figures included above are stated net of corporate
taxation.
Consolidated Statement of Financial Position
As at 31 March 2020
As at As at
31 March 31 March
Notes 2020 2019
GBP000 GBP000
Non-current assets
Goodwill 8 70,028 43,637
Other intangible assets 53,398 29,607
Property, plant, equipment and right-of-use
assets 6,517 4,347
Deferred tax assets 724 550
Total non-current assets 130,667 78,141
Current assets
Cash and cash equivalents 9 25,089 13,247
Trade receivables and contract assets 10 40,238 44,518
Tax receivable 2,717 1,304
Withholding tax debtor 1,172 877
Other receivables 5,482 3,916
Total current assets 74,698 63,862
Current liabilities
Trade and other payables 11 (49,773) (45,748)
Contract liabilities (10,437) (8,637)
Lease liabilities (1,602) -
Provision for contingent consideration (3,500) (1,806)
Bank borrowings 12 (4,006) (1,611)
Total current liabilities (69,318) (57,802)
Net current assets 5,380 6,060
Non-current liabilities
Lease liabilities (1,231) -
Provision for contingent consideration (4,924) (57)
Bank borrowings 12 (42,741) (19,120)
Provision for defined benefit gratuity
plan (1,299) (1,032)
Deferred tax liabilities (7,121) (3,872)
Total non-current liabilities (57,316) (24,081)
Net assets 78,731 60,120
Equity attributable to the owners of the
parent company
Share capital 13 7,479 6,671
Share premium 13 27,555 6,666
Translation reserve (134) 1,475
Share-based payment reserve 8,660 12,540
Capital restructuring reserve (29,040) (29,040)
Retained earnings 64,207 62,000
Equity attributable to the owners of the
parent company 78,727 60,312
Non-controlling interest 4 (192)
Total equity 78,731 60,120
Statement of Changes in Equity
For the year ended 31 March 2020
Capital Total equity Non-controlling
restructuring attributable interest
reserve to
shareholders
Share-based of the
Share Share Translation payment Retained parent Total
capital premium reserve reserve Earnings company equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31
March 2018 6,204 1,246 1,759 10,782 (29,040) 63,104 54,055 107 54,162
Loss for the
year - - - - - (1,255) (1,255) (57) (1,312)
Foreign
exchange
differences - - (284) - - - (284) 69 (215)
Net actuarial
losses
recognised on
defined
gratuity plan - - - - - (9) (9) - (9)
Credit to equity
for
share-based
payments
(note 14) - - - 6,419 - - 6,419 - 6,419
Proceeds from
share issue,
including share
options
exercised (note
13) 343 2,190 - (727) - - 1,806 - 1,806
Debit to share
based
payment reserve
(note
14) - - - (3,934) - - (3,934) - (3,934)
Deferred tax on
share-based
payments - - - - - (187) (187) - (187)
Tax relief on
exercised
share-based
payments - - - - - 347 347 - 347
Issue of shares
as part
of acquisition
(note
13) 124 3,230 - - - - 3,354 - 3,354
Subscription in
non-controlling
interest's
shares of
IMImobile South
Africa
Pty Ltd - - - - - - - (311) (311)
Balance at 31
March 2019 6,671 6,666 1,475 12,540 (29,040) 62,000 60,312 (192) 60,120
Profit for the
year - - - - - 1,972 1,972 56 2,028
Foreign
exchange
differences - - (1,609) - - - (1,609) 140 (1,469)
Net actuarial
losses
recognised on
defined
gratuity plan - - - - - (145) (145) - (145)
Credit to equity
for
share-based
payments
(note 14) - - - 2,319 - - 2,319 - 2,319
Proceeds from
share issue,
including share
options
exercised, net
of expenses
(note 13) 792 20,391 - (738) - - 20,445 - 20,445
Debit to share
based
payment reserve
(note
14) - - - (5,461) - - (5,461) - (5,461)
Deferred tax on
share-based
payments - - - - - 45 45 - 45
Tax relief on
exercised
share-based
payments - - - - - 335 335 - 335
Issue of shares
as part
of acquisition
(note
13) 16 498 - - - - 514 - 514
Balance at 31
March 2020 7,479 27,555 (134) 8,660 (29,040) 64,207 78,727 4 78,731
Consolidated Cash Flow Statement
For the year ended 31 March 2020
Year ended Year ended
31 March 31 March
Notes 2020 2019
GBP000 GBP000
Cash generated from operations 15 20,875 15,903
Tax paid (2,587) (1,260)
Net cash from operating activities 18,288 14,643
Investing activities
Interest received 33 295
Purchase of intangible assets (6,248) (6,568)
Purchase of property, plant & equipment (657) (1,183)
Acquisition of subsidiary net of cash
acquired 17 (35,673) (16,575)
Contingent consideration as part of Infracast
acquisition 14 (4,947) (2,387)
Contingent consideration as part of Sumotext
acquisition - (1,143)
Contingent consideration as part of Healthcare
acquisition (1,750) -
Net cash used in investing activities (49,242) (27,561)
Financing activities
Principal element of lease payments 15 (1,429) -
Bank loan received 12 51,276 10,000
Repayment of bank loans 12 (24,537) (688)
Bank borrowing costs 12 (649) -
Loan to related party (889) -
Interest paid (1,386) (524)
Proceeds from issuance of Ordinary shares 13 20,445 1,806
Net cash generated by financing activities 42,831 10, 594
Net increase/(decrease) in cash and cash
equivalents 11,877 (2,324)
Cash and cash equivalents at beginning
of the year 13,247 15,743
Effect of foreign exchange rate changes (35) (172)
Cash and cash equivalents at end of the
year 9 25,089 13,247
1. Basis of preparation
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards as adopted for use by the EU ("IFRS"), this announcement
does not itself contain sufficient information to comply with IFRS.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 March 2020 or 31
March 2019 within the meaning of section 434(3) of the Companies
Act 2006. Statutory accounts for 2019 have been delivered to the
Registrar of Companies and those for 2020 will be delivered
following the Company's annual general meeting.
New and amended standards adopted by the Group
The Group has applied IFRS 16 Leases for the first time for the
period commencing 1 April 2019. This has resulted in the Group
recognising right-of-use assets and lease liabilities. For leases
previously classified as operating leases, under previous
accounting requirements the Group did not recognise related assets
or liabilities, and instead spread the lease payments on a
straight-line basis over the lease term. The Group has applied the
modified retrospective approach and has only recognised leases on
the statement of financial position as at 1 April 2019. Comparative
amounts for the year prior to the first adoption have not been
restated.
2. Basis of consolidation and accounting policies
The principal accounting policies set out below have been
applied consistently by the Group in preparing the financial
statements from which the financial information herein has been
exacted.
Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 March each year. Control is
achieved when the Company:
-- has the power over the investee;
-- is exposed, or has rights, to a variable return from its
involvement with the investee; and
-- has the ability to use its power to affect its returns.
The results of subsidiaries acquired or disposed of in any year
are included in the consolidated income statement from the date of
acquisition or up to the date of disposal.
Goodwill is measured as the excess of the sum of consideration
transferred. Goodwill is stated at cost less any accumulated
impairment losses. Goodwill is allocated to cash-generating units
and is not amortised but is tested annually for impairment.
Where necessary, adjustments are made to the financial
information of subsidiaries to bring the accounting policies into
line with those used by the Group. Inter-company balances and
transactions, including inter-company profits and unrealised
profits and losses are eliminated on consolidation.
Business combinations
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The Group
recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis. When the Group ceases to have
control, any retained interest in the entity is remeasured to its
fair value at the date when control is lost, with the change in
carrying amount recognised in the income statement.
Any contingent consideration payable is measured at fair value
at the acquisition date. If the contingent consideration is
classified as equity, then it is not re-measured and settlement is
accounted for within equity. Otherwise, subsequent changes in the
fair value of the contingent consideration are recognised in profit
or loss.
Impairment of assets
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill for each CGU
is compared to the recoverable amount, which is the higher of value
in use and the fair value less costs of disposal. Any impairment is
recognised immediately as an expense and is not subsequently
reversed.
Other intangible assets not ready to use are not subject to
amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs of disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are largely independent cash inflows. Prior impairments of
non-financial assets are reviewed for possible reversal at each
reporting date.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset in prior years. A
reversal of an impairment loss is recognised immediately in the
consolidated income statement.
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker
(CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Board of Directors that makes strategic
decisions.
During the current year the CODM started to consider results
principally by operating division split between services sold on
cloud communication products and operator VAS and mobile payment
services, which are further split by geographical region. This
forms the Group's operating and reporting segments. This is a
change from prior years when the results were principally
considered by geographical region only. Geographically, the
operating segments are defined as Europe, Americas, Asia-Pacific
(APAC) and Middle East and Africa (MEA).
The performance of the operating segments is assessed based on a
measure of revenue and gross profit (the result for the segment).
Any sales between segments are carried out at arm's length. As
operating costs are shared across regions, results from gross
profit to adjusted EBITDA are assessed between services sold on
cloud communication products, operator VAS and mobile payment
services, and central adjusted operating costs. Results from
adjusted EBITDA to profit after tax are assessed on a consolidated
basis only in the current year. As prior year results were only
reviewed geographically it is not possible to allocate operating
costs by operating division, so prior year results from gross
profit to profit after tax are assessed on a consolidated basis
only.
The Group does not regularly provide information in relation to
the assets or liabilities of operating segments to management.
Revenue recognition
Revenue is recognised in accordance with the requirements of
IFRS 15 Revenue from Contracts with Customers. The Group recognises
revenue to depict the transfer of promised services to customers in
an amount that reflects the consideration to which the Group
expects to be entitled in exchange for those services. This core
principle is delivered in a five-step model framework:
-- Identify the contract(s) with the customer;
-- Identify the performance obligations in the contract;
-- Determine the transaction price;
-- Allocate the transaction price to the performance obligations in the contract; and
-- Recognise revenue when (or as) the entity satisfies a performance obligation.
Revenue is measured based on the consideration to which the
Group expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. The Group
recognises revenue when it transfers or provides control of a
product or service to a customer.
Where the Group enters into arrangements to deliver multiple
elements (such as a perpetual license together with a period of
servicing and maintenance), such elements are separated for
recognition based on stand-alone value where sold and delivered as
separate performance obligations. If such elements cannot be
separated they are treated as a single performance obligation and
recognised over the period of delivery when the criteria for
recognition have been met. Amounts incurred but not yet billed are
classified as contract assets. Revenues are typically billed up to
60 days after month end and classified as contract assets until
this point.
Monthly recurring revenue
Revenues from hosting and for access to the Group's cloud-based
communications and CPaaS software, including the use of shortcodes
to run the service, form a single performance obligation and is
recognised over the period of the contract as the customer
simultaneously receives and consumes the service.
Revenue share from content related sales and usage-based revenue
from messages sent across multiple channels is triggered by the
actions of the Group's customers (or their end users) using the
relevant platform they are connected to. Revenue is recognised at a
point in time as the content sale or message delivery is
generated.
Revenue generated from the provision of professional services to
manage software applications for customers are recognised pro-rata
over the period the services are provided.
Where the Group provides services to mobile network operators
which enable the delivery of wholesale messages, revenue is
reported on a gross basis where the Group acts as principal and
controls the right to perform the service and successfully deliver
the messages at a point in time.
The Group acts as agent when providing carrier billing or
payments made via mobile devices services so revenue and payments
to suppliers are recorded in revenue on a net basis, representing
the margin earned. Revenue recognised within turnover relate only
to the commission earned on hosting each service and are recognised
at the point the message or content is delivered to the end user.
Amounts billed and collected on behalf of third parties (also known
as pass through revenues) are not recognised within revenue as the
Group doesn't control or handle the content or set the price
charged to the end user.
Non-recurring revenue
License revenues are derived from the sale of perpetual end user
licenses for the right to use software as it exists at the point
the customer is able to use the service for its intended purpose.
The Group assesses whether ongoing contractual obligations, such as
annual maintenance charges, represent a performance obligation that
is distinct from the license. If the licence is distinct it is
recognised separately from the other performance obligations on
customer acceptance following installation at the customer's
locations as per contracted terms.
Non-recurring professional service revenues relate to one-time
configuration, setup and change requests and are recognised at the
point the customer is able to use the service for its intended
purpose, or upon completion of designated milestones where the
Group has an enforceable right to payment.
Goodwill
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred over the
Group's interest in the net fair value of the net identifiable
assets, liabilities and contingent liabilities of the acquiree and
the fair value of the non-controlling interest in the acquiree.
Goodwill acquired in a business combination is allocated to each
cash generating unit ("CGU"), or groups of CGUs, that is expected
to benefit from the synergies of the combination. Each CGU or group
of CGUs to which the goodwill is allocated represents the lowest
level within the entity at which the goodwill is monitored for
internal management purposes. Goodwill is monitored at the CGU
level.
Employee benefits
Defined benefit gratuity plan
The Group has a post-employment unfunded gratuity plan in place
for all IMI Mobile Private Limited employees ("defined benefit
gratuity plan"). An employee who has completed five years of
service is entitled to a cash bonus calculated as a fraction of the
employee's last drawn salary multiplied by the number of completed
years of service, capped at INR 2,000,000.
The expected costs of these benefits are accrued over the period
of employment using the same accounting methodology as used for
defined benefit pension plans. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions
are charged to other comprehensive income in the period in which
they arise.
The Projected Unit Credit Method is used to determine the
present value of the defined benefit obligation and the related
current service cost and, where applicable, past service cost.
These obligations are valued periodically by independent
qualified actuaries.
Defined contribution plan
The Group operates defined contribution plans for certain
employees. A defined contribution plan is a pension plan under
which the Group pays fixed contributions into a separate entity.
The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the
current and prior periods. These contributions are expensed in the
period they are incurred.
Employee share-based payments
The Group operates a number of equity-settled, share-based
payment plans, under which the entity receives services from
employees as consideration for equity instruments (options) of the
Group. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense in the
income statement with a corresponding increase in equity. The total
amount to be expensed is measured at the grant date by reference to
the fair value of the options granted measured using the
Black-Scholes option valuation model:
-- including any market performance conditions (for example, an entity's share price);
-- excluding the impact of any service and non-market
performance vesting conditions (for example, profitability, sales
growth targets and remaining an employee of the entity over a
specified time period); and
-- including the impact of any non-vesting conditions (for
example, the requirement for employees to save).
Non-market performance and service conditions are included in
assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is
the period over which all of the specified vesting conditions are
to be satisfied and the employees become unconditionally entitled
to the options.
At the end of each reporting period, the Group revises its
estimates of the number of options that are expected to vest based
on expected leavers and estimated achievement for the non-market
vesting conditions. It recognises the impact of the revision to
original estimates, if any, in the consolidated income statement,
with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The
proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium.
The social security contributions payable in connection with the
grant of the share options are included in the share-based payment
charge except where they are payable by the employee.
Where options are cancelled by the Group and settled in cash the
expense is accelerated in the period in which the options are
settled, with the cash payment recognised in the share-based
payment reserve.
Accounting policies adopted in relation to the valuation of
specific acquisition related contingent consideration and put/call
options are provided in note 14.
Company share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
Taxation
The Group's tax charge is the sum of total current and deferred
tax charges.
Current tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the consolidated income statement, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the balance sheet date
in the countries where the Company and its subsidiaries operate and
generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
consolidated income statement because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interest in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The recognition of deferred tax assets is determined by
reference to the Group's estimate of recoverability, using models
where appropriate to forecast future taxable profits. Deferred tax
assets have only been recognised for territories where the Group
considers that it is probable there would be sufficient taxable
profits for the future deductions to be utilised. If it is probable
that some portion of these assets will not be realised, then no
asset is recognised in relation to that portion.
The carrying amount is reviewed at each balance sheet date. If
market conditions improve and future results of operations exceed
our current expectations, our existing recognised deferred tax
assets may be adjusted, resulting in future tax benefits.
Alternatively, if market conditions deteriorate or future results
of operations are less than expected, future assessments may result
in a determination that some or all of the deferred tax assets are
not realisable. As a result, all or a portion of the deferred tax
assets may need to be reversed.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the balance sheet date. Deferred tax is
charged or credited in the statement of income, except when it
relates to items charged or credited in other comprehensive income,
in which case the deferred tax is also dealt with in other
comprehensive income.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to taxes levied by the
same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affects the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reported period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results may ultimately differ from those estimates.
The critical accounting judgements and key sources of estimation
uncertainty at the reporting date derive from management
assumptions in respect of:
Critical accounting judgements
Business combinations
The recognition of business combinations requires the excess of
the purchase price of acquisitions over the net book value of
assets acquired to be allocated to the assets and liabilities of
the acquired entity. The Group makes judgements in relation to the
fair value allocation of the purchase price. If any unallocated
portion is positive it is recognised as goodwill and if negative,
it is recognised in the consolidated income statement.
Judgement is required in determining the fair value of
identifiable assets, liabilities and contingent assets and
liabilities assumed in a business combination and the fair value of
the consideration payable. Calculating the fair values involves the
use of significant judgement around the assumptions applied,
including expectations about future cash flows, discount rates and
the lives of assets following purchase.
Revenue recognition
When the Group sells services as a principal, income and
payments to suppliers are reported on a gross basis in revenue and
cost of sales. If the Group sells services as an agent, revenue and
payments to suppliers are recorded in revenue on a net basis,
representing the margin earned. Whether the Group is considered to
be the principal or an agent in the transaction depends on analysis
by management of both the legal form and substance of the agreement
between the Group and its business partners. Such judgements impact
the amount of reported revenue and cost of sales but do not impact
reported assets, liabilities or cash flows.
The Group would have recognised pass through revenues totalling
GBP23,828,000 (2019: GBP30,311,000) within revenue and cost of
sales had management judged that the Group were principal, rather
than agent, in billing revenue transactions where amounts are
billed and collected on behalf of third parties.
Key sources of estimation uncertainty
Impairment reviews
Management undertake periodic tests for impairment of goodwill
if events or changes in circumstances indicate that the carrying
amount may not be recoverable. Impairment testing is an area
involving management judgement, requiring assessment as to whether
the carrying value of goodwill can be supported by the net present
value of future cash flows. In calculating the net present value of
the future cash flows, certain assumptions are required to be made
in respect of highly uncertain matters.
Management consider the cash flow growth rate, expressed as the
compound annual growth rates in the initial five years of the
business plans and forecasts, to be the key source of estimation
uncertainty. The growth rates used across the cash-generating units
would need to decrease as follows before impairment would be
required:
Cash flow growth
rate:
At which
Used in impairment
impairment would be
review required
Europe large enterprise 24% (7%)
Textlocal 20% (45%)
Healthcare 16% (30%)
South Africa 34% (17%)
North America 14% (16%)
Taxation including deferred taxation
The calculation of the Group's total tax charge necessarily
involves a degree of estimation and judgement in respect of certain
items. Provisions for tax contingencies require management to make
judgements and estimates in relation to tax audit issues and
exposures. Tax benefits are not recognised unless it is probable
that the tax position will be sustained.
Management must also assess the probability that the deferred
tax assets will be recovered from future taxable income. Deferred
tax assets relating to losses and other timing differences of
GBP2,781,000 (2019: GBP2,314,000) have not been recognised. Of this
balance, management consider there to be particular uncertainty
over the range of GBPnil to GBP783,000 (2019: GBPnil to GBP433,000)
relating to the estimation of forecast future taxable income in IMI
Mobile Private Limited.
As at 31 March 2019 the carrying amount of deferred tax assets
was GBP724,000 (2019: GBP550,000) and the carrying amount of
deferred tax liabilities was GBP7,121,000 (2019: GBP3,872,000).
The accounting policies in relation to these items are disclosed
in note 2.
4. Operating segments
The following is an analysis of the Group's revenue and results
by operating segment:
Europe Americas APAC MEA Total
GBP000 GBP000 GBP000 GBP000 GBP000
Year ended 31 March 2020
Revenue
Cloud communication products 107,001 25,787 8,844 9,250 150,882
Operator VAS and mobile
payments 4,535 1,281 9,163 5,326 20,305
Total revenue 111,536 27,068 18,007 14,576 171,187
Gross profit
Cloud communication products 37,760 18,364 4,012 4,386 64,522
Operator VAS and mobile
payments 2,600 1,069 6,012 4,904 14,585
Total gross profit 40,360 19,433 10,024 9,290 79,107
Adjusted operating costs
(note 7)
Cloud communication products (41,767)
Operator VAS and mobile
payments (13,499)
Central (2,244)
Total adjusted operating
costs (57,510)
Adjusted EBITDA (note
7)
Cloud communication products 22,755
Operator VAS and mobile
payments 1,086
Central (2,244)
Total adjusted EBITDA 21,597
Depreciation and amortisation (10,977)
Share-based payment charge (2,172)
Acquisition costs (3,838)
Operating profit 4,610
Finance income 145
Finance cost (1,625)
Profit before tax 3,130
Tax (1,102)
Profit after tax 2,028
Europe Americas APAC MEA Total
GBP000 GBP000 GBP000 GBP000 GBP000
Year ended 31 March 2019
Revenue
Cloud communication products 94,400 10,498 7,216 7,897 120,011
Operator VAS and mobile
payments 6,207 89 9,160 7,264 22,720
Total revenue 100,607 10,587 16,376 15,161 142,731
Gross profit
Cloud communication products 33,296 7,276 2,774 3,389 46,735
Operator VAS and mobile
payments 4,013 62 6,051 5,712 15,838
Total gross profit 37,309 7,338 8,825 9,101 62,573
Adjusted operating costs
(note 7)(2) (43,504)
Adjusted EBITDA (note
7)(1) 19,069
IFRS 16 restatement of
adjusted EBITDA (1,028)
Adjusted EBITDA (as previously
reported) 18,041
Depreciation and amortisation (7,085)
Share-based payment charge (8,899)
Acquisition costs (1,036)
Exchange losses on the
Nigerian Naira (26)
Operating profit 995
Finance income 295
Finance cost (580)
Profit before tax 710
Tax (2,022)
Profit after tax (1,312)
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 2 for each
period. The revenue reported is measured in a manner consistent
with that in the consolidated income statement. Revenues are
attributed to countries on the basis of the customer's location.
The Group measures segment profit and loss as gross profit as
reported.
[1] Adjusted for costs which management do not consider reflect
underlying business performance - see note 7 for details of
adjusted performance measures, adjusting items and a reconciliation
of statutory results to adjusted results.
2 Restated prior year adjusted performance measure had IFRS 16
been adopted from 1 April 2018
The following is an analysis of the revenue and gross profit of
the Group's top 5 customers (based on gross profit):
Revenue Revenue Gross profit Gross profit
GBP000 % of total GBP000 % of total
Year ended 31 March 2020
Customer A 28,656 17% 5,150 7%
Customer B 3,879 2% 3,516 4%
Customer C 5,238 3% 2,944 4%
Customer D 7,925 5% 2,807 4%
Customer E 2,907 2% 2,687 3%
Revenue Revenue Gross profit Gross profit
GBP000 % of total GBP000 % of total
Year ended 31 March 2019
Customer A 26,495 19% 4,898 8%
Customer B - - - -
Customer C 4,792 3% 2,787 4%
Customer D 5,646 4% 1,707 3%
Customer E 2,110 1% 1,841 3%
Revenue
The Group derives its revenue from contracts with customers for
the transfer of services over time and at a point in time in the
following major product lines. This is consistent with the revenue
information that is disclosed above for each reportable segment
under IFRS 8 Operating Segments.
Year ended Year ended
31 March 31 March
2020 2019
GBP000 GBP000
Disaggregation of revenue:
MRR
- monthly hosting, access and shortcode
fees Over time 25,158 18,461
Point in
- revenue share and usage time 135,272 115,776
Point in
- professional services time 1,787 1,380
NRR
Point in
- perpetual licenses time 1,318 1,511
Point in
- professional services time 7,652 5,603
171,187 142,731
During the year the Group recognised revenue of GBP8,355,000
(2019: GBP6,095,000) related to contract liabilities
carried-forward from the prior year. No revenue was recognised in
the either year from performance obligations satisfied (or
partially satisfied) in prior years. All remaining performance
obligations are comprised of contact liabilities of GBP10,437,000
at 31 March 2020 (2019: GBP8,637,000).
Additional voluntary disclosures
The following disclosures are provided for additional purposes
only and does not form part of the Group's segmental reporting
under IFRS 8. In addition to reviewing operating division and
geographical performance, the Chief Operating Decision Maker also
considers the performance of the Group in line with its revenue
model, as disclosed in note 2.
The following is an analysis of the Group's revenue and result
by revenue model:
MRR NRR Total
GBP000 GBP000 GBP000
Year ended 31 March 2020
Revenue
Cloud communication products 144,347 6,535 150,882
Operator VAS and mobile payments 17,870 2,435 20,305
Total revenue 162,217 8,970 171,187
Gross profit
Cloud communication products 58,131 6,391 64,522
Operator VAS and mobile payments 12,717 1,868 14,585
Total gross profit 70,848 8,259 79,107
Year ended 31 March 2019
Revenue
Cloud communication products 115,762 4,247 120,009
Operator VAS and mobile payments 19,855 2,867 22,722
Total revenue 135,617 7,114 142,731
Gross profit
Cloud communication products 42,611 4,124 46,735
Operator VAS and mobile payments 13,728 2,110 15,838
Total gross profit 56,339 6,234 62,573
5. Tax
Year ended Year ended
31 March 31 March
2020 2019
GBP000 GBP000
Current tax
UK tax expense 394 1,081
India tax expense - 265
Other foreign tax expense 1,044 566
Withholding tax expense 753 318
Adjustments in respect of prior periods (199) (191)
1,992 2,039
Deferred tax
Current year (553) 70
Adjustments in respect of prior periods (337) (87)
(890) (17)
Total tax charge 1,102 2,022
The total tax charge for the year can be reconciled to the
result per consolidated income statement as follows:
Year ended Year ended
31 March 31 March
2020 2019
GBP000 GBP000
Profit before tax 3,130 710
Tax at the UK corporation tax rate of 19% (2019:
19%) 595 135
Effect of overseas tax rates 258 608
Share based payment charge not deductible for
tax purposes 413 1,691
(Income not taxable) / other expenses not deductible (222) 348
Temporary differences on which deferred tax not
recognised 583 (254)
Effect of change in UK tax rate 11 82
Tax adjustments in respect of previous years (536) (278)
Enhanced tax relief on research and development
expenditure - (310)
Total tax charged in the income statement 1,102 2,022
Taxation for each region is calculated at the rates prevailing
in the respective jurisdictions. Prior year adjustments relate to
the routine confirmation and agreement of the final tax position in
local jurisdictions.
The main rate of UK corporation tax in the period was 19%. In
March 2020, the Chancellor announced that the planned reduction in
the corporation tax rate to 17% from 1 April 2020 would no longer
take place, and the rate would remain at 19% going forwards.
Following a Budget resolution on 17 March 2020, the 19% rate was
substantively enacted. Accordingly, UK deferred balances have been
recognised at 19% in the period.
6. Earnings per share ('EPS')
Year ended Year ended
31 March 31 March
2020 2019
pence pence
Basic EPS 2.7p (1.9p)
Adjusted basic EPS 17.0p 16.7p
Diluted EPS 2.5p (1.9p)
Adjusted diluted EPS 15.5p 15.1p
Year ended Year ended
31 March 31 March
2020 2019
Million Million
Weighted average number of ordinary shares for
the purpose of basic EPS 72.1 64.9
Effect of dilutive potential ordinary shares:
share options 7.1 6.8
Weighted average number of ordinary shares for
the purpose of diluted EPS 79.2 71.7
See note 7 for a reconciliation of statutory results to adjusted
results. The adjusted profit after tax earnings measure is used for
the purpose of calculating adjusted earnings per share.
7. Adjusted performance measures
A number of adjusted performance measures are used in this
announcement and financial statements which are not defined or
specified under the requirements of International Financial
Reporting Standards (IFRS). Adjusting items are excluded from our
headline performance measures by virtue of their size and nature,
in order to reflect management's view of the performance of the
Group and facilitate the reader to compare performance against
prior years more easily.
The Group believes that alternative performance measures such as
adjusted EBITDA are commonly reported by companies in the markets
in which it competes and are widely used by investors in comparing
performance on a consistent basis without regard to factors such as
depreciation and amortisation, which can vary significantly
depending upon accounting methods (particularly when acquisitions
have occurred), or based on factors which do not reflect the
underlying performance of the business.
In particular, the Group presents on the face of the income
statement those material items of expenditure which, because of
their nature and/or expected infrequency of the events giving rise
to them, merit separate presentation to allow shareholders to
understand the elements of financial performance in the period. The
measures used are adjusted EBITDA, adjusted operating profit,
adjusted profit before tax, adjusted profit after tax, adjusted
diluted EPS and adjusted cash generated from operations.
Summarised below is a reconciliation from statutory results to
adjusted results.
Statutory Adjusted
results A B C D E F results
Year ended: GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
31 March 2020
Revenue 171,187 - - - - - - 171,187
Gross profit 79,107 - - - - - - 79,107
Operating costs (74,497) 2,172 3,838 5,340 - - - (63,147)
Operating profit 4,610 2,172 3,838 5,340 - - - 15,960
Profit before tax 3,130 2,172 3,943 5,340 - - - 14,585
Tax (1,102) 290 (634) (867) - - - (2,313)
Profit after tax 2,028 2,462 3,309 4,473 - - - 12,272
EBITDA(1) 15,587 2,172 3,838 - - - - 21,597
Cash generated from
operations 20,875 - 3,096 - - - - 23,971
Basic EPS (pence) 2.7 3.4 4.6 6.2 - - 0.1 17.0
Diluted EPS (pence) 2.5 3.1 4.2 5.6 - - 0.1 15.5
Statutory Adjusted
results A B C D E F Results
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
31 March 2019
Revenue 142,731 - - - - - - 142,731
Gross profit 62,573 - - - - - - 62,573
Operating costs (61,578) 8,899 1,036 3,025 97 26 - (48,495)
Operating profit 995 8,899 1,036 3,025 97 26 - 14,078
Profit before tax 710 8,899 1,036 3,025 (49) 26 - 13,647
Tax (2,022) (143) (113) (613) - - - (2,891)
(Loss)/profit after
tax (1,312) 8,756 923 2,412 (49) 26 - 10,756
EBITDA(1) 8,080 8,899 1,036 - 1,028 26 - 19,069
Cash generated from
operations 15,903 - 1,036 - 1,028 - - 17,967
Basic EPS (pence) (1.9) 13.5 1.4 3.7 0.0 0.0 0.0 16.7
Diluted EPS (pence) (1.9) 12.2 1.3 3.4 0.0 0.0 0.1 15.1
Adjustments for costs which management do not consider reflect
underlying business performance:
A Share-based payment charge net of tax
-- GBP1,035,000 (2019: GBP5,639,000) relates to contingent
consideration arising from acquisition activities
-- GBP147,000 credit (2019: GBP2,480,000 charge) relates to put options on acquisitions
-- GBP223,000 (2019: GBP4,000) relates to employee share schemes
granted as part of the Group's listing in June 2014
-- GBP183,000 (2019: GBP111,000) relates to employee share
schemes granted as a means of retention for key employees joining
the Group as a result of an acquisition
-- GBP1,168,000 (2019: GBP522,000) relates to on-going employee incentive share schemes
Share-based payment charges are commonly adjusted from headline
results by similar companies which operate in the same markets as
the Group. Management believe that share-based payments linked to
acquisitions and the Company's IPO should be considered one-off in
nature and do not reflect the underlying performance of the Group.
On-going employee incentive share schemes have not been
consistently granted to employees since IPO and the share-based
payment expense in the income statement has therefore not been
consistent over this period and the effect on profits do not
reflect the underlying performance of the Group.
B Costs directly relating to acquisitions including retention
bonuses payable to key management personnel of the acquired entity
agreed at the time of acquisition.
C Amortisation of acquired intangibles. The majority of
intangible assets acquired via acquisitions relate to value which
has been created prior to acquisition, the cost of which has been
expensed over time. Had the Group chosen to create these assets
instead of acquiring them the related costs would have been
expensed in prior periods. It is therefore considered appropriate
to exclude the amortisation of these historic expenses from the
adjusted results of the Group.
D Restatement of prior year adjusted performance measures had
IFRS 16 been adopted from 1 April 2018.
E Exchange losses incurred on the Nigerian Naira following its
unpegging against the US Dollar on 20 June 2016. As this is no
longer a material amount it is not being included as an adjusting
item from 1 April 2019.
F Basic adjusted EPS and diluted adjusted EPS includes profit
attributable to non-controlling interests not included in the
calculation of statutory basic and diluted EPS. Diluted adjusted
EPS also includes the dilutive effect of share options not included
in statutory diluted EPS when they have an anti-dilutive
effect.
[1] Unadjusted EBITDA is operating profit plus depreciation and
amortisation.
8. Goodwill
Goodwill is monitored by management at the CGU level by region
and delivery model. The group restructured its CGUs following the
final contingent consideration payment relating to the Infracast
acquisition, combining Infracast with Europe(1) and adding Rostrvm
during the year to form a single CGU. The acquisition of 3C during
the year also resulted in a restructuring of operations in the
North America region, combining the existing CGUs with the
acquisition. The following is a summary of goodwill allocation for
each CGU, all of which relate to the cloud communication products
operating division:
Additions Foreign Closing
Combination exchange
Opening of CGUs movement
GBP000 GBP000 GBP000 GBP000 GBP000
31 March 2020
Europe large enterprise 7,861 4,880 2,272 - 15,013
Textlocal 10,073 - - - 10,073
Infracast 4,880 (4,880) - - -
Healthcare 6,382 - - - 6,382
South Africa (previously
Archer) 2,242 - - (310) 1,932
North America - 12,199 24,800 (371) 36,628
Sumotext 1,851 (1,851) - - -
Impact Mobile 10,145 (10,145) - - -
ExpressPigeon 203 (203) - - -
Total 43,637 - 27,072 (681) 70,028
Hindsight Foreign Closing
adjustment exchange
Opening Additions movement
GBP000 GBP000 GBP000 GBP000 GBP000
31 March 2019
Europe(1) 7,861 - - - 7,861
Textlocal 10,073 - - - 10,073
Infracast 4,880 - - - 4,880
Healthcare 6,198 - 184 - 6,382
Archer 2,532 - - (290) 2,242
Sumotext 1,721 - - 130 1,851
Impact Mobile - 10,205 - (60) 10,145
ExpressPigeon - 215 - (12) 203
Total 33,265 10,420 184 (232) 43,637
The recoverable amount of all CGUs has been determined based on
value-in-use calculations. These calculations use pre-tax cash flow
projections based on financial budgets approved by management
covering a five-year period. Cash flows beyond the five-year period
are extrapolated using the estimated growth rates stated below. The
long-term growth rates are management's estimates. The discount
rates used are pre-tax and reflect specific risks relating to the
relevant CGU.
[1] Excluding Textlocal, Infracast and Healthcare in the prior
year.
CGUs serve a common group of customers such that the key
assumptions used for value-in-use calculations for all CGUs are as
follows:
Cash flow growth Discount
rate rate
At 31 March 2020
Europe large enterprise 24% 4.1%
Textlocal 20% 4.1%
Healthcare 16% 4.1%
South Africa 34% 12.1%
North America 14% 4.6%
At 31 March 2019
Europe(1) 11% 10.1%
Textlocal 16% 10.1%
Infracast 32% 10.1%
Healthcare 31% 10.1%
Archer 27% 16.4%
Sumotext 42% 11.3%
Value in use is calculated for the various CGUs based on
approved business plans and forecasts taking into account certain
variables for each CGU. Below is a description of the principal
variables that have been considered for each CGU with significant
goodwill.
Cash flow growth rate and long-term growth rate
Cash flow growth rate is expressed as the compound annual growth
rates in the initial five years for all cash-generating units of
the business plans and forecasts used for impairment testing.
Impairment tests are performed using the projected cash flows
based on Board approved forecasts and strategic plans over a
five-year period. Cash flow projections from the sixth year are
calculated using an expected constant growth rate.
Discount rate
The discount rates used are disclosed above and take into
account the market risk rate associated with the company. A
discount factor is calculated using the discount rate and applied
to future projected cash flows.
Sensitivity analysis
The principal variables used across the cash-generating units
would need to change to the following levels before impairment
would be required:
Cash flow Long-term Discount
growth growth rate
rate rate
At 31 March 2020
Europe large enterprise (7%) <(1,000%) 48%
Textlocal (45%) <(1,000%) 30%
Healthcare (30%) (111%) 21%
South Africa (17%) <(1,000%) 40%
North America (16%) (13.4%) 12%
9. Cash and cash equivalents
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
Unrestricted
Cash on hand and at bank 24,883 13,151
Restricted
Short-term bank deposits 206 96
Cash and cash equivalents 25,089 13,247
Restricted short-term bank deposits represent cash balances
deposited in bank accounts attracting a preferential interest rate
and are typically deposited for a period of 90 to 180 days.
Preferential interest rates are agreed in advance of the deposit
being transferred and depend on the prevailing local rates and
market conditions at the time.
The Group at the year-end held cash at bank amounts as
follows:
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
UK Pounds Sterling 17,694 4,765
US Dollar 2,936 1,963
Indian Rupee 1,049 2,266
Euro 1,046 1,124
South African Rand 797 804
Tunisian Dinar 480 295
Canadian Dollar 474 1,304
Bangladeshi Taka 236 99
United Arab Emirates Dirham 229 218
Nepalese Rupee 81 106
Nigerian Naira 27 66
Myanmar Kyat 20 221
Australian Dollar 17 -
Sri Lankan Rupee 3 16
25,089 13,247
10. Trade receivables and contract assets
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
Trade receivables
- revenue to be collected on behalf of the Group 23,748 27,879
- pass through revenues to be collected on behalf
of third parties 22 512
- expected credit loss allowance (829) (507)
Contract assets
- revenue to be collected on behalf of the Group 15,685 14,253
- pass through revenues to be collected on behalf
of third parties 2,028 2,767
- expected credit loss allowance (416) (386)
Trade receivables and contract assets - net 40,238 44,518
Credit quality of customers is assessed by taking into account
the current financial position of the customer, past experience and
forward looking factors, including economic outlook. The historical
level of customer default is low and, as a result, the credit
quality of period end trade receivables is considered to be high.
Trade receivables are considered past due once they have passed
their contracted due date. The Group review trade receivables past
due but not impaired on a regular basis and in determining the
recoverability of the trade receivables, the Group considers any
change in the credit quality of the trade receivable from the date
credit was initially granted up to the reporting date.
Included in the Group's trade receivables balance are debtors
with a carrying amount of GBP11,958,000 (2019: GBP9,917,000) which
are past due at the reporting date, for which the Group has not
provided as there has not been a significant change in credit
quality and the Group believes that the amounts are still
recoverable. Of the total balance, GBP4,833,000 (2019:
GBP4,756,000) is past due by fewer than 30 days. The average age of
trade receivables and contract assets, excluding pass through
revenues, is 81 days (2019: 108 days).
The increase in contract assets is consistent with the increase
in revenue.
Movements in the allowance for expected credit losses are as
follows:
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
As at 1 April 893 701
On acquisition 105 17
Charged to the income statement 2,844 431
Credited to the income statement (238) (1)
Debts written off (2,375) (268)
Foreign exchange 16 13
As at 31 March 1,245 893
The amount charged to the income statement includes GBP2,075,000
related to a mobile operator value added services customer based in
the Middle East, which the Group determined was not recoverable. As
a result an accrual of GBP986,000 for third party costs incurred in
supporting this client were reversed and credited to the income
statement as payment of these costs is contingent on receipt from
the customer.
The movement in the expected credit loss allowance has been
included in operating costs in the consolidated income
statement.
The Group at the year-end held trade receivables and contract
assets as follows:
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
UK Pounds Sterling 21,017 27,884
US Dollar 8,289 4,207
Indian Rupee 4,135 5,587
Euro 1,883 1,843
South African Rand 1,895 1,775
Canadian Dollar 1,593 1,693
Bangladeshi Taka 48 302
Nepalese Rupee 201 154
Myanmar Kyat 1,013 853
Other 164 220
40,238 44,518
11. Trade and other payables
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
Trade payables
- cost of sales to be paid on behalf of the Group 21,119 17,416
- pass through revenues to be paid to third parties 3,141 2,591
Accrued expenses
- cost of sales to be paid on behalf of the Group 16,952 16,694
- pass through revenues to be paid to third parties 1,275 2,530
Put option on acquisitions (note 14) 866 1,013
VAT payable 2,969 3,075
RDEC deferred income 1,460 1,070
Other payables 1,991 1,359
49,773 45,748
Trade payables balances are non-interest bearing and are settled
within 30-60 days.
12. Bank borrowings
As at As at
31 March 31 March
2020 2019
GBP000 GBP000
UK bank loans due in less than one year 4,000 1,473
Bank borrowing costs (130) (81)
3,870 1,392
South African bank loans due in less than one
year 136 219
Bank loans due in less than one year 4,006 1,611
UK bank loans due in more than one year 43,192 18,934
Bank borrowing costs (451) (36)
42,741 18,898
South African bank loans due in more than one
year - 222
Bank loans due in more than one year 42,741 19,120
The Company agreed new UK bank loan facilities in August 2019
and amended in December 2019. The existing facilities were repaid
in full at the time the new facilities were agreed. The new
facility includes a GBP30,000,000 5-year term loan with annual
interest of between 1.65% and 2.35% plus LIBOR based on the level
of adjusted leverage, and a GBP20,000,000 revolving loan facility
repayable over 5 years and bearing interest at an annual rate of
between 1.65% and 2.35% plus LIBOR based on the level of adjusted
leverage.
A South African bank loan of ZAR 15,000,000 was taken by Archer
Digital Limited in October 2016, repayable over four years. The
loan is secured by fixed assets and bears interest at South
Africa's prime rate plus 1%.
The movements in bank borrowings over the year were as
follows:
South
Old New Africa
UK bank UK bank bank Subtotal Borrowing
loan loan loan costs Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2019 20,407 - 441 20,848 (117) 20,731
Loan drawdowns 1,239 50,037 - 51,276 - 51,276
Principal repayments (21,642) (2,675) (220) (24,537) - (24,537)
Capitalised bank borrowing
costs - - - - (649) (649)
Borrowing costs written
off on refinancing - - - - 105 105
Amortisation of borrowing
costs - - - - 80 80
Exchange differences (4) (170) (85) (259) - (259)
At 31 March 2020 - 47,192 136 47,328 (581) 46,747
13. Share capital, share premium
Share Total
Allotted, called up and fully paid Capital Share Premium
GBP000 GBP000 GBP000
At 1 April 2019 6,671 6,666 13,337
Share placing 653 18,938 19,591
Share options exercised 139 1,453 1,592
Issued as part of Infracast contingent consideration
(note 14) 16 498 514
At 31 March 2020 7,479 27,555 35,034
Number
of Ordinary
shares
At 1 April 2019 66,709,211
Share placing 6,533,422
Share options exercised 1,391,490
Issued as part of Infracast contingent consideration
(note 14) 159,606
At 31 March 2020 74,793,729
During the year 1,028,994 share options were exercised for
consideration of GBP854,000. The exercise of 219,996 flowering
share options and 142,500 unapproved options for nil consideration
has been accounted for as a reduction of GBP738,000 in the
share-based payment reserve.
Ordinary shares
The Group's capital consists of a single class of equity
share.
The amount classified as equity share capital represents the
nominal value of allotted, called up and fully paid ordinary shares
at a par value of GBP0.10. Each holder of ordinary shares is
entitled to one vote per share.
14. Share-based payments
The Group recognised the following expense related to
share-based payments:
31 March 31 March
2020 2019
GBP000 GBP000
Employee share schemes granted as part of
the Group's listing in June 2014 4 76
Employee share schemes granted to retain key
staff as part of an acquisition 159 122
On-going employee incentive share schemes 1,121 582
Total share-based payment charge on options
granted to Directors and employees 1,284 780
Infracast contingent consideration 1,035 4,426
Healthcare Communications contingent consideration - 1,213
Credit to equity for share-based payments 2,319 6,419
Archer put option (147) 73
Sumotext put option - 2,407
Movement in put options on acquisitions (147) 2,480
Share-based payment charge 2,172 8,899
Total of Employee Share Schemes
As at 31 March 2020 As at 31 March 2019
Weighted Number Weighted Number
average exercise of share average exercise of share
price (GBP) options price (GBP) options
At 1 April 1.14 10,830,199 0.78 12,351,756
Granted 2.78 1,399,000 2.32 2,034,900
( 3 ,427,
Exercised 0.62 (1,391,490) 0.53 923 )
Forfeited 2.61 (189,409) 1.83 (128,534)
At 31 March 1.40 10,648,300 1.14 10,830,199
Vested 0.74 6,385,031 0.52 6,019,419
Unvested 2.37 4,263,269 1.91 4,810,780
At 31 March 1.40 10,648,300 1.14 10,830,199
The aggregate fair value of options granted in the year is
GBP1,172,000 (2019: GBP2,119,000). The options outstanding at 31
March 2020 have a weighted average remaining contractual life of
6.5 years (2019: 6.9 years).
IMImobile South Africa (formerly Archer) put/call option
Archer management team's shareholding in Archer Digital Limited
includes a put option which enables them to sell their holding to
the Group after 5 years or in the event of an unconditional offer
for the Company, and a call option which gives the Group the right
to require management to sell some or all of its holding at fair
market value. The Group revalues this option each year and has
accounted for it as a cash settled share-based payment vesting over
the 5-year period, with a credit of GBP147,000 recorded in the year
ended 31 March 2020 (2019: charge of GBP73,000).
The fair value at grant date has been determined using the
Black-Scholes valuation model. The significant inputs into the
model were a risk-free interest rate of 0.44% to 1.10%, an expected
option life of five years, volatility of 9% to 35% depending on the
vesting date of the options and a dividend yield of nil.
Infracast contingent consideration
The contingent consideration arising from the acquisition of
Infracast is treated as remuneration rather than consideration as
one of the conditions of payment is continued employment of one of
the shareholders of the company post-acquisition. As the Group has
the option to settle the contingent consideration in shares in the
Company or cash, it is included as a share-based payment. The
charge is taken to the consolidated income statement evenly over
the period from acquisition to the settlement date.
During the year the Group recorded total expense of GBP1,035,000
in the year (2019: GBP4,426,000) and settled the contingent
consideration arising in the current and prior years in
GBP4,947,000 of cash and the issue of 159,606 shares, resulting in
a reduction to the share-based payment reserve.
There will be no further charges in relation to the Infracast
contingent consideration.
15. Notes to the Consolidated Cash Flow Statement
Cash generated from operations
Year ended Year ended
31 March 31 March
Notes 2020 2019
GBP000 GBP000
Cash flows from operating activities:
Profit before taxation 3,130 710
Adjustments:
Net finance costs 1,480 285
Share-based payments 14 2,172 8,899
Exchange losses on the Nigerian Naira - 26
Depreciation of property, plant and
equipment 3,380 2,069
Amortisation of intangible assets 7,597 5,016
Operating cash flow before movements
in working capital: 17,759 17,005
Increase in receivables 4,144 (9,666)
Increase in payables (1,096) 8,426
Increase in provision for defined benefit
gratuity plan 68 138
Cash generated from operations 20,875 15,903
Net debt
This section sets out an analysis of net debt and the movements
in net debt for each of the periods presented.
Year ended Year ended
31 March 31 March
2020 2019
GBP000 GBP000
Cash and cash equivalents 25,089 13,247
Bank borrowings - current and non-current (46,747) (20,731)
Lease liability recognised on transition to
IFRS 16 (2,833) -
(24,491) (7,484)
Cash and cash equivalents Total bank borrowings Lease liabilities Total
GBP000 GBP000 GBP000 GBP000
At 1 April 2019 13,247 (20,731) - (7,484)
Cash flows 11,842 (26,016) 1,429 (12,745)
Lease liability recognised on
transition to IFRS 16 - - (1,419) (1,419)
New lease agreements - - (2,560) (2,560)
Re-measurement of existing lease
liabilities (183) (183)
Interest charge on lease
liabilities - - (100) (100)
At 31 March 2020 25,089 (46,747) (2,833) (24,491)
16. Contingent liabilities
Effective November 2019, a retention and incentive programme was
agreed with a number of key individuals whereby a one time cash
bonus will be paid in the event of a change in control of the Group
(meaning a change in greater than 50% of the voting capital stock),
providing the employee remains in employment at the date of change
in control. The cash bonus is determined based on the share price
at the date of change of control. The range of amounts payable are
GBPnil to GBP8,755,000 depending on the share price. The Directors
of the Company are not beneficiaries of this programme.
17. Acquisitions
Acquisition of 3Cinteractive Corp. ("3C")
On 26 August 2019 the Group acquired 100% of the share capital
of 3C for a total consideration of $53.8 million (GBP44.0 million)
comprising:
-- initial consideration of $43.8 million (GBP35.8 million)
settled in cash, funded through the drawdown of new debt facilities
(see note 12) and the raising of GBP19.6 million from the placing
of 6,533,422 new Ordinary shares in the Company net of the costs of
share issue; and
-- deferred payments of $10.0 million (GBP8.2 million) to be
partly settled in cash and partly through the issue of 1,937,146
new Ordinary shares in the Company deferred for up to two years.
These payments have been discounted to their net present value of
$9.3 million (GBP7.6 million).
3C has direct relationships with US blue-chip enterprises and
all major US carriers and provides a number of mobile engagement
capabilities to enterprises, including mobile messaging, mobile
coupons, mobile wallet, mobile web, and more across the United
States. 3C is a pioneer in the Rich Communications Services (RCS)
Business Messaging market in North America and the acquisition will
see IMImobile establish a leadership position in deploying RCS
Business Messaging solutions for large consumer-facing brands and
enterprises globally.
The acquisition builds on the Group's position in North America
which is the largest addressable market for its cloud product set.
3C's entrenched relationships with their long-standing blue-chip
enterprise clients provides a market position that would have been
difficult to achieve organically, and the Group is confident this
will provide a solid foundation for up-sell and cross-sell of
IMImobile's cloud platform capability. There is also a considerable
opportunity to leverage 3C's direct connectivity with US mobile
operators to attract new customers. Significant cost synergies have
also been identified in technology development and central
management.
3C has a highly experienced management team and the founders and
existing management team will remain with the Group. Under
IMImobile employment they will be incentivised to receive a cash
bonus of up to $2m subject to continuous employment over a two-year
period post completion of the Acquisition and up to a maximum of a
further self-generating $4m subject to a combination of stretching
gross profit growth and EBITDA performance conditions over the same
period.
The results of the acquired entity which have been consolidated
in the income statement from 26 August 2019 contributed GBP15.4
million of revenue and a profit of GBP0.1 million attributable to
equity shareholders of the Group during the period. Had 3C been
acquired at the start of the period the contribution would have
been GBP26.4 million of revenue and a profit of GBP0.2 million
after adjusting for acquisition related expenses.
The provisional purchase price allocation is set out in the
table below:
Fair value
GBP000
Net assets acquired:
Identifiable intangible assets:
Customer relationships 16,026
Technology 6,105
Trade name 1,447
Deferred tax recognised on identifiable intangible assets:
Customer relationships (3,185)
Technology (1,571)
Trade name (372)
Property, plant and equipment 714
Other intangible assets 99
Deferred tax asset 1,516
Trade and other receivables 2,393
Cash and cash equivalents 2,651
Trade and other payables (7,228)
Net identifiable assets acquired 18,595
Goodwill 24,800
Total consideration 43,395
Cash consideration during the period 35,804
Cash acquired (2,651)
Consideration during the period net of cash acquired 33,153
Cash consideration during the period 35,804
Consideration due in less than one year 2,622
Consideration due in more than one year 4,969
Total consideration 43,395
Acquisition of Rostrvm Solutions Limited ("Rostrvm")
On 25 November 2019 the Group acquired 100% of the share capital
of Rostrvm, a UK-based contact centre software provider, to provide
the Group with additional voice channel and contact centre
capabilities. The total consideration of GBP3.5 million (GBP4.5
million on a normalised working capital basis) will be satisfied in
cash, with GBP3.0 million paid on completion and GBP1.5 million
deferred for up to two years, contingent on successful integration
of the Rostrvm voice capability with the Group's platforms and
achievement of revenue and gross profit targets. GBP0.5 million of
the deferred payments were paid in the year and the remaining
payments have been discounted to their net present value of GBP1.4
million.
The results of the acquired entity which have been consolidated
in the income statement from 25 November 2019 contributed GBP0.7
million of revenue and a nil profit or loss attributable to equity
shareholders of the Group during the period. Had Rostrvm been
acquired at the start of the period the contribution would have
been GBP2.1 million of revenue and a profit of GBP0.1 million.
The provisional purchase price allocation is set out in the
table below:
Fair value
GBP000
Net assets acquired:
Identifiable intangible assets:
Customer relationships 440
Technology 1,130
Trade name 110
Deferred tax recognised on identifiable intangible assets:
Customer relationships (138)
Technology (190)
Trade name (25)
Property, plant and equipment 120
Trade and other receivables 364
Cash and cash equivalents 1,026
Trade and other payables (687)
Deferred tax liability (25)
Net identifiable assets acquired 2,125
Goodwill 2,272
Total consideration 4,397
Cash consideration during the period 3,546
Cash acquired (1,026)
Consideration during the period net of cash acquired 2,520
Cash consideration during the period 3,546
Consideration due in less than one year 851
Total consideration 4,397
18. Post balance sheet events
Share placing
On 9 April 2020 the Group announced the successful completion of
a non-pre-emptive placing of ordinary shares in the capital of the
Company. A total of 7,415,575 ordinary shares were placed at a
price of 300p per share, raising gross proceeds of GBP22.2m. The
ordinary shares are fully paid and will rank pari passu in all
respects with each other and with the existing ordinary shares of
the Company, including, without limitation, the right to receive
all dividends and other distributions declared, made or paid after
the date of issue.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKFBQKBKKDOB
(END) Dow Jones Newswires
July 28, 2020 02:02 ET (06:02 GMT)
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