Source - RNS
RNS Number : 2566K
Kalibrate Technologies plc
20 September 2016
 

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014 (MAR). 

 

20 September 2016

Kalibrate Technologies plc

 

("Kalibrate", the "Company" or the "Group")

 

FINAL RESULTS ANNOUNCEMENT

FOR THE FISCAL YEAR ENDED 30 JUNE 2016

 

Kalibrate Technologies plc (AIM: KLBT), the provider of strategy and technology services to the global fuel and convenience retail industry, announces its final audited results for the fiscal year ended 30 June 2016.

 

Financial highlights:

·      Revenue increased by 7% to $34.9 million (2015: $32.5 million)

Pricing revenue up 3% to $22.2 million (2015: $21.5 million)

Planning revenue surged 15% to $12.7 million (2015: $11.0 million)

Strengthened annualised recurring revenues to $23 million, an increase of $2 million since 30 June 2015, providing greater revenue visibility and stability

·      Underlying EBITDA* maintained at $4.3 million (2015: $4.36 million) following:

continued investment in infrastructure to meet demand for future software as a service ("SaaS") and new Merchandise Pricing and Promotion Solution

change in mix between Pricing and Planning

·      Underlying operating profit**  of $2.6 million (2015: $3.2 million)

·      Profit before tax of $1.8 million (2015: $2.3 million)

·      Net cash of $2.4 million as at 30 June 2016 (2015: $4.6 million) 

* Underlying EBITDA is operating profit before share-based payments, restructuring costs and business combination amortisation after adding back depreciation and amortisation

** Operating profit before share based payments, business combination and restructuring costs

 

Operational highlights:

·      Continued growth with significant deals:

signing in late Q4 of a $1.85 million Pricing perpetual licence contract with a US-based national fuel and convenience store chain with over 1,400 locations; 

signing in late Q4 of a $1.57 million Pricing perpetual licence deal with an independent refiner and B2B fuel retailer. The relationship includes a new B2B/wholesale Pricing solution;

continuing to win new SaaS contracts, including a large multi-country European fuel retailer;

ongoing progress in emerging markets with the first contract win in Chile with a leading multi-country South American fuel retailer;

continued success in Mexico with one Pricing and two Planning contact wins following its entry into the marketplace in December 2015; and 

a first Pricing perpetual licence deal signed in China.

 

·      New business and expansion in Mexico, India, SE Asia, China and South America

·      Successfully entered 4 new territories:  China, Chile, the Netherlands and Belgium

·      Now cross-selling to 33 clients which has almost doubled from 18 since the admission to AIM

·      Over 99% client retention over past 7 years

·      Launched Merchandise Pricing and Promotion platform during the fiscal year

·      Continued interest in our SaaS offering: 10 clients transitioned from perpetual licence resulting in approximately $2.0 million of SaaS bookings

·      41 hosted clients now secured, up from 28 at the start of the financial year

 

 

Post-period highlights:

·      Post period end, Kalibrate formed an entity with its long-time agent in India to sell locally as it positions the Group for future growth in this recently deregulated market

 

  

Commenting on the results, Bob Stein, CEO of Kalibrate, said:  

 

"We are pleased to report our financial results which are in line with market expectations. Our key strategies deployed since the IPO continue to result in year-on-year growth. As we enter a new financial year, in order to enhance sustainable growth in the longer term, we will increase our capital allocation in the key growth areas that we have identified.

 

In FY17, we will strategically invest from operating cash flow in positioning Kalibrate to the opportunities in Rest of World, in particular India, Asia and Africa, where we see opportunities for growth as deregulating markets can benefit from our expertise. At the same time, as sales cycles in emerging markets tend to be more challenging, we will diversify our offer by investing in our new Merchandise Pricing and Promotion platform and improved wholesale/B2B Pricing proposition to provide new products to our global client base.

 

We look forward to the year ahead with optimism believing this planned investment will allow us to capitalise on the opportunities open to us and position the Group well for continued success."

 

 

For further information please contact:

Kalibrate Technologies plc

via FTI Consulting, LLP 

Robert B Stein, Jr. Chief Executive Officer

 

Gregg R Budoi, Chief Financial Officer

 

 

 

N+1 Singer Advisory LLP

+44 (0) 20 7496 3000

Shaun Dobson

Alex Price

 

 

 

FTI Consulting, LLP     

+44 (0) 20 3727 1000

Matt Dixon / Chris Lane / Emma Appleton / Elena Kalinskaya

 

 

* * * * *

 

About Kalibrate

 

For over 20 years, Kalibrate (LSE: KLBT) has advised fuel and convenience retailers throughout the world on how to be best-in-class operators in the fast changing marketplace. Kalibrate's global footprint and local presence are the result of a merger between two market leaders: KSS Fuels, the forerunner in fuel pricing automation, and MPSI, recognized leaders of retail network planning. Clients gain fuller visibility, truer insight and more effective control over what matters most-total site profitability. Headquartered in Manchester, United Kingdom and Florham Park, New Jersey, Kalibrate has centers of excellence in Mumbai, India; Tulsa, Oklahoma; and Melbourne, Australia as well as offices in 10 other countries. For more information, visit kalibrate.com.

 

  

Chairman's statement

 

As the Chairman of the Board of Directors I am pleased to present the report on the Group's annual performance. Once again the Group has demonstrated its solid position as the market leader in providing comprehensive strategy and technology services to the global fuel and convenience retailers.

 

For the seventh consecutive year, Kalibrate has achieved year-on-year revenue growth through focused execution of its strategy. The Group posted another record revenue result of $34.9 million, a 7.2% increase over the prior year. While the Group always strives for achieving sustained revenue growth, it remains keenly focused on demonstrable profitable growth. This fiscal year, as highlighted in our interim results, we continued to invest in infrastructure to meet our future SaaS demand resulting in an underlying EBITDA* of $4.3 million for the period, similar to its $4.36 million in fiscal year 2015, and a statutory pre-tax profit of $1.8 million.

 

Our clients are constantly faced with increased competition in both the motor fuel area and in retail merchandising. This past fiscal year saw the continuation of unparalleled and prolonged price pressure and volatility for many integrated fuel companies. In such times of volatility Kalibrate stands out as the only global provider of both Pricing and Planning solutions delivered through a single platform, powered by an unmatched, verified market intelligence dataset.

 

In keeping with our strategic plan of providing more offerings to motor fuel and convenience retailers, Kalibrate was pleased to introduce a new in-store Merchandise Pricing and Promotion offering during the period. This is a new platform that we believe will assist convenience retailers in gaining more visibility into their merchandise categories within their stores. Additionally, in this upcoming fiscal year, the Group will be modifying its existing wholesale Pricing platform to accommodate global business-to-business ("B2B") pricing analytics. These new offerings in addition to the regular updates and enhancements to our Kalibrate Cloud suite of products will provide the cornerstone of future global growth. 

 

To support our larger clients with their global expansion, we improved our ability to serve our global markets through increased investment in sales and sales support personnel around the globe. Leveraging on our reputation as the global industry leader, Kalibrate continued to add new clients during the year that are viewed in their respective markets as the best in class retailers.

 

Our staff

 

The key to our continued success rests upon our people. Kalibrate has created a culture in which our employees have an unmatched commitment to providing first class service to our new and existing clients.  The industries we serve not only recognize Kalibrate as a leader in its software but, more importantly, in the insight provided by our employees to our clients and to the industry as a whole. On behalf of the Board, I thank all employees for their continued dedication to the success of our business and look forward to their involvement in our future progress.

 

Planned investment and outlook

 

As we enter a new financial year, the Board remains committed to executing on our stated strategy. We have proven that sticking to our plan has achieved continuously improved revenue while adding value for our clients.

 

This coming year we will place particular emphasis upon improving even more the global breadth of our business, focusing our attention on areas with higher growth potential. As such, we plan to increase investment from operating cash flow into the Rest of the World, our Merchandise Pricing and Promotion platform & B2B/wholesale Pricing solution to better position Kalibrate for long term global growth.

 

We are confident in our ability to continue to grow Kalibrate in accordance with expectations but increasingly our ability to do this requires us to secure significant wins from the emerging markets and countries with higher growth potential such as India, Asia and Africa. For the current financial year we are seeing encouraging signs that this will prove to be the case but often sales cycles in these markets tend to be more prolonged in terms of timing for closing deals.

 

* Underlying EBITDA is operating profit before business combination amortisation, share based payments, restructuring costs and after adding back depreciation and amortisation.

Notwithstanding that, we have always expected medium-term growth to come from emerging markets where we see opportunities for higher growth as deregulating markets can benefit from our expertise. At the same time as investing in the rest of the world we are diversifying our offering into our new Merchandise Pricing and Promotion and wholesale/B2B Pricing platforms. We view this investment as extremely important to Kalibrate going forward and believe these service areas will provide us with new avenues of growth in addition to our expectations from emerging markets.

 

We look forward to the year ahead with optimism believing this planned investment will allow us to capitalise on the opportunities open to us and position the Group well for continued success.

 

 

Philip Lawler

Chairman of the Board

19 September 2016

 

 

Chief Executive's review

 

FOCUSED STRATEGY LEADS TO CONSISTENT GROWTH

 

This past fiscal year ended 30 June 2016, Kalibrate achieved its seventh consecutive year of record revenue, with $34.9 million in revenue compared with the prior year of $32.5 million. The Group was able to achieve this by remaining focused on the five main components of its strategic plan that was set out at Kalibrate's admission to AIM in November 2013. This included: (1) driving growth through the expansion in our core markets and cross-selling to existing clients; (2) expanding our global outreach into new geographic markets; (3) developing complementary products and services; (4) expanding upon our managed services offering; and (5) driving the transition of Kalibrate clients to a SaaS model.

 

Kalibrate continues to make progress in blending its Pricing and Planning lines of business into one unified offering, but, as of today we still report them separately. I am pleased that the Group reported increased revenue in both the Planning and Pricing segments. The Planning business increased by 15% to $12.7 million in revenue and the revenue for Pricing products grew by 3% to $22.2 million. As a result, our annualised recurring revenue increased to $23 million from $21 million in the prior year, and our order book increased to $43.5 million, both of which provide us with greater revenue visibility and stability for the future.

 

OUR INVESTMENT INTO THE FUTURE

 

Traditionally, a majority of the Group's revenue and profits has been generated from the continued adoption of Kalibrate's Pricing and Planning solutions in its core markets, namely the USA, Europe and Japan.

 

1.         Reliance on Global expansion

 

Moving forward, the Group considers that new geographical markets outside of these three core markets will become increasingly more important for Kalibrate and its growth in the medium-term. As such, in order to embolden its presence and derive future growth, the Group plans on increasing its investment in these new and exciting territories, specifically in India, Southeast Asia, China and Africa. In that regard, Kalibrate has recently formed a local entity in India, formalizing an arrangement with its long-time agent to support the Group's plans. 

 

2.         New Merchandise Pricing and Promotion platform

 

On 14 September 2015 the Group announced its new Merchandise Pricing and Promotion offering. Kalibrate has already experienced significant interest in this solution, both from existing clients that use the Group's Pricing and Planning solutions as well as from new, convenience-store only operators. Kalibrate therefore intends to invest in this offering so as to ensure that it is able to capitalise on this interest and anticipated demand.

 

3.         New Global wholesale/B2B solution

 

The Group also intends to invest into its wholesale/B2B Pricing solutions for the oil and gas industry. All integrated oil companies and most fuel retailers around the globe maintain a B2B wholesale division. Most of these companies utilize legacy in-house systems that are able to provide varying levels of data analytics to assist with the pricing of wholesale contracts. The Group's existing and planned new B2B platform will fill an unmet need within the industry. The Group has witnessed clear global interest from existing clients and potentially new customers for this solution, as evidenced by a deal signed in the second half of fiscal year 2016. 

 

Following the UK's vote to leave the European Union, the Group notes that the Pound Sterling exchange rate against the Euro and US dollar has been significantly affected. The Group reports in US dollars with approximately 15% of its revenue and 27% of its costs in Pound Sterling, therefore the Group currently anticipates only a minimal impact going forward on its trading from current movements in exchange rates. We continue to monitor the situation, and as a global business operating in 70 countries, we are well diversified which provides us with a natural level of hedging as we continue to focus our attention on helping our clients around the world.

 

 

OUR BUSINESS SEGMENTS

 

Pricing - 64% of total revenue

 

The Group's fuel Pricing solution automates and scales the analysis and execution of optimal pricing based on strategic criteria each client defines. Advanced price elasticity models, critical historical price/volume and competitor data and flexible formulas result in predictive analytics for the most competitive prices. The Group's Pricing platform continues to be recognized as the industry standard in not only its core markets of North America and Europe but also around the globe. In those core markets, the Group has many of the top tier fuel retailers as clients which helps to sell our products and services both within the core and new geographic markets.

 

During the 2016 fiscal year I am delighted to report that we were successful in a number of significant client wins, including:

·      signing in late Q4 of a $1.85 million Pricing perpetual licence contract with a US-based national fuel and convenience store chain with over 1,400 locations; 

·      signing in late Q4 of a $1.57 million Pricing perpetual licence deal with an independent refiner and B2B fuel retailer. The relationship includes a new B2B/wholesale Pricing solution;

·      continuing to win new SaaS contracts, including a large multi-country European fuel retailer;

·      ongoing progress in emerging markets with the first contract win in Chile with a leading multi-country South American fuel retailer;

·      continued success in Mexico with one Pricing and two Planning contact wins following its entry into the marketplace in December 2015; and 

·      a first Pricing perpetual licence deal signed in China.

 

As announced previously, the Group is encouraging its new and existing clients to transition to a SaaS model by upgrading to our new Kalibrate Cloud offer. However, in certain circumstances this is not always possible. During the past year the Group's largest deals have come in the form of a perpetual licence sales that have a recurring stream of associated software maintenance revenue. In North America, the Group signed significant contracts with four of the top retailers that combined control in excess of 4,000 retail locations, all as perpetual licences. This does not depart from the Group's objective of continuing to increase adoption of its SaaS offering for its Pricing software where applicable.

 

The Group's Pricing segment continues to grow as a whole, with the core Pricing platform up 8% whilst a legacy service offering that provides significant recurring revenue at a very low margin declined in revenue by approximately 22%. We are of course pleased that the overall demand for the Group's Pricing software continues to increase as retailers search for every advantage against their competitors.

 

Planning & strategy - 36% of total revenue

 

Our Planning solutions provide Kalibrate's clients with in-depth market and demand analysis, capital investment scenario analysis, forecast changes in demand and rapid assessment of the competition, as well as forecasting sales volumes of fuel, convenience stores, fast food restaurants and car washes often located on petrol retail sites. The increase in revenue for the Group's Planning products has been largely driven by the consolidation of fuel and convenience retailers in the Group's core markets of Europe and North America. The Group has signed several multi-year Planning projects in Europe in this past year which provides a solid stream of recurring revenue. 

 

A saleable by-product of the Planning business is the vast amount of traffic counts, demographic, retail volume statistical data that is collected as the Group complete market study models for its clients. This data is then packaged into separate analytic offerings that clients purchase on a recurring basis. The data resale category is a relatively small but growing segment within the Group. 

 

Kalibrate's Strategy Group division provides consultative expertise in Pricing, Planning and market intelligence that leverages Kalibrate's extensive data set with its industry leading consultants. Kalibrate's Strategy Group division is at the forefront of market and industry trends, contributing thought leadership that raises Kalibrate's profile in the industry as a whole. Through the combination of its expertise in market analytics, the Group's solutions remain a critically important decision making tool for site planning. 

 

 

OUR GEOGRAPHIES

 

North America - 55% of Group revenue

 

In North America, the Group achieved balanced year-on-year growth in both Pricing and Planning revenue. The Pricing revenue was up 9% attributable to several significant perpetual licence deals with four premier retailers which provides evidence that Kalibrate's products resonate with the larger top tier retailers.  Similarly, Planning Revenue increased 9.7% mostly as the result of successfully cross-selling Planning products to existing Pricing clients and due to the consolidation that continues throughout the region.

 

Europe - 24% of Group revenue

 

The revenue for Europe was relatively flat year-on-year. This was mainly due to a large deal originally designed as perpetual that came in as SaaS, although this decrease was partly offset by the implementation of two large Planning deals. The significant merger and acquisition activity in the European market has been driving considerable interest in the Group's Planning segment. In the second quarter of fiscal year 2017 the Group will commence another multi-year Planning engagement with one of its Pricing clients for a new significant cross-sell opportunity.

 

Rest of World - 21% of Group revenue

 

To a large degree the Rest of World growth revolves around the various stages of deregulation in several countries around the globe. Most notable of these deregulation stories for fiscal year 2016 was related to the quick deregulation of Mexico. As the market deregulated, there was an immediate response from the retailers to accelerate their level of preparedness to meet the changing market requirements. 

 

The other significant deregulation revolves around the more measured approach demonstrated by the retailers in India. In order to be better prepared for the market growth, Kalibrate established a legal entity in India in the form of the strategic arrangement with its long-time agent. By having an entity in the local market, the request for proposal process and the sales cycles should be more streamlined.

 

During the year, we are pleased to have re-entered and transacted business in China for a retail Pricing contract. While it was a relatively small deal for Kalibrate in the fiscal year, it marked a potentially monumental shift in the way the Chinese retailers view petroleum retail competition.

 

The Asia-Pacific region has provided many opportunities over the years and this past fiscal year the Group saw revenue growth for the Pricing segment. The vast decoupling of motor fuel retail from convenience retailer in the marketplace means that it is very likely that this market will be more conducive to utilize Kalibrate's new Merchandise Pricing and Promotion platform.

 

OUR STRATEGY

 

We have achieved consistent growth through sticking to our plan and executing on our core strategies. Success to date has been achieved by maintaining our focus and investing in the resources necessary to execute our plan. While we continue to focus on improving all areas of our strategy, we plan to place additional emphasis and investment in accelerating our growth into new geographic regions.  

 

Geographic expansion ("Think Globally")

 

While the Group continues to progress within its core markets of North America and Europe, its priority for this coming year is to be more global as reflected in the new corporate theme, "Think Globally". Although the Group has a global footprint with the presence in over 70 countries, only 21% of its revenue is comprised of "Rest of World" sales. The Group's success in creating market dominance in its core markets was driven by its industry expert staff domiciled within or near those markets. As such, in order to accelerate its growth within existing non-core markets and adding new geographies, the Group plans to invest in additional sales and sales support resources specifically in India, Southeast Asia, China and Africa. With particular interest to the Group are markets that are planning to, or recently have, deregulated. 

 

As governments are moving toward deregulation of motor fuel and allow the retailers to operate in a free market, Kalibrate is well positioned to capitalise on this compelling opportunity. Over the years, the Group has become a leader in providing not only the tools to assist companies to operate in a newly deregulated market but, is also called upon for its insight, advice and market expertise through all phases of the deregulation process. Several Latin American countries recently deregulated and the Group mobilized sales staff directly into the market full time and, as a result, the Group was able to sign $1.6 million of new contracts within the fiscal year. Post-year end, in July 2016, the Group formed an entity with its long time agent in India to create a local presence in the country. The India market deregulated in 2015 and the major companies are all now seeking ways to navigate the newly competitive landscape. The Group is using this new arrangement to create a local presence and deploy its experts directly in the market to accelerate sales cycles and support clients.

 

During the year, we are pleased to have re-entered the Chinese market with a Pricing contract. While China has not officially deregulated the market, retailers are seeking ways to be more competitive in managing their fuel pricing within this environment. 

 

Leverage our clients

 

The greatest asset of the Group is its unparalleled client base within the fuel and convenience retail industry.  There is no other data analytics company that has the same level of top tier integrated oil companies and fuel/convenience retailers around the globe. While we are proud that we have the best in class client base, we are more proud that we have achieved over 99% client retention. At the time of our IPO, 18 of our over 150 tier 1 clients purchased both Pricing and Planning solutions and services. This total now stands at 33, a steady increase but encouragingly with further room to grow.

 

We have had significant success this year in generating revenue from our existing clients, which has been achieved through cross-selling our Pricing and Location/Planning products as well as expanded services and data reselling. To evidence that our strategy has been working, the Group signed a significant contract with one of its long-time Planning clients to add retail Pricing and its wholesale Pricing platforms generating a multi-year booking of over $4 million.

 

The complexities of managing fuel and convenience retail performance are increasing. Thus, a large number of legacy and in-house systems being used by Kalibrate's existing and prospective clients are no longer able to cope with the volume of data and sophisticated analytics required to keep pace with market dynamics. Kalibrate is well positioned to capitalise on these opportunities to help clients manage and navigate this complexity.

 

Expand product offering

 

The cornerstone of our strategy relates to providing all the services to assist fuel/convenience retail clients improve upon the 7 Elements for Fuel and Convenience Retail Success ("7E").  The Group has identified that all successful retailers excel when they manage these 7E (location, pricing, market, merchandising, facility, operations and brand). The Group's Kalibrate Cloud has been deployed to clients and provides the Pricing and Planning intelligence under one unified platform to assist companies improve their operating performance and profitability. Kalibrate's Cloud offering allows clients to access their Pricing, Location and Market Intelligence services securely in a cloud environment. This offers the fuel and convenience retail industry an expert source for intelligence, insight and action to support faster, more confident decisions and is fully mobile enabled via desktop, tablet or smartphone. Our SaaS solution provides the Group with another way to win new clients, motivate existing clients to upgrade and increasing recurring revenue. While the Group is encouraging all existing and new clients to adopt the SaaS model, many larger clients still prefer to acquire the software via a perpetual licence.

 

In addition to the Kalibrate Cloud introduction, the most significant product introduction relates to the Group's launch of a Merchandise Pricing and Promotion platform which assists convenience retailers with maximizing instore sales and profit. The Group is presently modifying the platform to ensure that it meets all the needs of the convenience retailer. This software has been deployed at one of Kalibrate's long-term clients to further define the business requirements while several other clients are planning to test the platform in during the first half of fiscal year 2017.

 

As another offering for its existing and new clients, the Group has improved its wholesale Pricing platform which has been successfully deployed at clients in North America. During the current fiscal year, the Group plans to invest development resources toward making this platform ready to be deployed to its global clients in other geographies.

 

These product offering expansions afford the Group the opportunity to have a wider breadth of product suite to attract new clients and cross sell within its existing client base.

 

Increase recurring revenue from SaaS and managed services

 

As the Group introduces its Kalibrate Cloud, Merchandise Pricing and Promotion and improved B2B offering, it is encouraging its client base, where possible, to migrate toward the SaaS model. To accommodate the ease of the transition, Kalibrate maintains a relationship with Rackspace, the industry leading provider of hosting solutions. At the time of our flotation, the Group identified that it had over 100 existing Pricing clients that would be suitable for a managed/hosted services offering. As at 30 June 2016, the Group has secured 41 hosted clients, up from 14 at the time of the floatation. The Group's focus remains on continuing to convert existing clients as well as adding new clients to our managed services/hosting offering in order to grow further our recurring revenue base. The Kalibrate Cloud single platform will be the driver for clients to move to managed services.

 

Historically, Kalibrate sold its Pricing product by way of the sale of an upfront perpetual licence to a client. In line with the Group's strategy, a number of new contracts this year have been secured on a SaaS basis which offers Kalibrate greater revenue visibility, longer-term client relationships typically of three to five year fixed terms and higher overall gross margins. The Group continues to encourage new clients to purchase its pricing software via a SaaS model, however many larger clients still prefer to acquire software under the perpetual licence purchase.

 

This past fiscal year the Group sold 10 clients under a SaaS contract for a total booking of approximately $2.0 million while 4 significant contracts were signed in North America as perpetual licences.  Even under a perpetual licence arrangement, the Group increased its recurring revenue as all perpetual licences have a multi-year professional services/maintenance contract. During the fiscal year, the Group increased its annualised recurring revenue by $2.0 million to achieve an annualised recurring revenue total of $23.0 million.

 

Our people are our strength

 

Kalibrate is distinguished among competitors through its people's expertise and true dedication to client success. The Group was able to retain over 99% global clients this past year as a result of genuine dedication and domain expertise in our clients' business. This fiscal year the Group is focused on ensuring that its employee base is structured to meet its global growth plans. To that end, the Group has invested in its employee base to accommodate its future plans. I am proud that so many clients consider us not just a solutions provider but a partner who cares about their business. Every day around the world our professionals build Kalibrate's reputation for precise business insight and industry expertise. I warmly thank our people throughout the world-Kalibrate's greatest strength.

 

Outlook

 

Kalibrate continues to deliver upon the strategic goals that were outlined when the Group joined AIM. We have made solid progress, achieved consistent financial performance, retained existing clients, won new clients and invested further in our platform offerings. By delivering comprehensive solutions to a diverse client base in a dynamic industry, we are well placed to retain our market-leading position.

 

We have been investing in our infrastructure in the Rest of the World, in particular in India, Asia and Africa where we see opportunities for growth. As we enter a new financial year, we are hopeful these new markets will yield compelling opportunities although we are still reliant on government timelines and, as such, we believe it is critical to diversify our offering and invest now from operating cash flow into our new Merchandise Pricing and Promotion platform and wholesale/B2B Pricing offering to provide new revenue sources and additional avenues of growth.

 

We are in the right place at the right time with the right expertise and solutions. We move into the new financial year with confidence that our strategic roadmap is correct for consistent growth that will serve clients well and generate positive outcomes for our shareholders.

 

 

Robert B Stein, Jr.

Chief Executive Officer

19 September 2016

 

 

Chief Financial Officer's review

 

Revenue

 

The Group has delivered a 7.2% revenue growth to report record revenue of $34.9 million compared with $32.5 million in the prior fiscal year. Revenue is segmented by the Group's Planning and Pricing business lines and further by the geographies. Revenue in the Planning business increased by 15% to $12.7 million as a result of significant growth in European projects offset by a decline in the African and Japanese markets (which is attributable to shrinking fuel retail sites in these markets and devaluation of currencies to the US dollar). Revenue for Pricing products grew by 3% to $22.2 million compared with $21.5 million in the prior fiscal year with an increase of 8% in the core Pricing products offset by a 22% decrease in a legacy price service offering. This legacy Pricing offering is still being utilized by a number of clients to gather competitive pricing data in the market. The Group is working to identify ways to automate this process through electronic data collection or crowd sourcing data.  As such, until the Group identifies alternative methods of data collection, it is anticipated that this small part of the business will not be a growth focus for the Group.

 

The Group ended the fiscal year with $23 million of annualised recurring revenue which represented a 9.5% increase over the period of $21 million. While continuing to encourage its clients to migrate toward SaaS contracts, which have a higher recurring revenue component, the Group successfully closed a number of significant Pricing deals as perpetual licence deals at the request of the clients. As mentioned above, the Group experienced significant decline in its legacy Pricing service offering which has a large recurring revenue component but low profit margins. When adjusting for the decline in this legacy business line, the recurring revenue on the core business increased by 11.5%. Further, the Group's total order book increased in the fiscal year by 5% to $43.5 million and the order book would have increased to $44.4 million if adjusted for the legacy business line.

 

Profit

 

Underlying EBITDA, which is operating profit before business combination amortisation, share based payments, restructuring costs, after adding back depreciation and amortisation, is the Group's key profitability measure. Underlying EBITDA for the year maintained at $4.3 million, compared to the $4.36 million in the prior year. Whilst keenly focused on profitability improvement, the Group has continued to invest in additional planned resources from operating cash flow in the areas of sales, marketing and client support to further its expansion into new geographies. In addition and as planned, the Group invested in its new Merchandise Pricing and Promotion platform. These planned investments were made to accelerate the growth into new geographies and to introduce the Merchandise offering to new and existing clients.

 

Operating profit before share based payments, restructuring costs and business combination amortisation for the year was $2.6 million which is lower than the $3.2 million reported in the prior year due to the EBITDA change above plus additional depreciation and amortisation expense associated with the Group's planned investment into new software and technology. Statutory operating profit was $1.9 million (2015: $2.4 million). The statutory profit before tax was $1.8 million (2015: $2.3 million).

 

Restructuring costs totalled $0.6 million (2015: $0.4 million restructuring costs) in the period which related to a general restructuring within the business in order to reallocate the capital resources toward the Merchandise Pricing and Promotion offering and our global initiatives that include more global sales, support and thought leadership.

 

Finance costs 

 

Net finance costs were $0.02 million (2015: $0.06 million) related to an equipment lease for certain business equipment and unused facility fees associated with its revolving line of credit. In March 2016, the Group signed a borrowing facility with PNC Bank in the United States of America for a two year $5 million revolving line of credit. This facility will be used to support the issuance of letters of credit, any acquisition or business development activity and any general working capital needs. 

 

Tax

 

The Group had a net tax benefit of $0.2 million (2015: expense of $0.3 million). The Group's recognised deferred tax assets relate to tax losses in the UK and the US.  There are also unrecognised tax losses arising in the UK of $9,475,000 at 18% per cent, $1,706,000 (2015: $12,100,000 at 20 per cent, $2,420,000).  Tax losses arising in the USA for which no deferred tax asset was recognised were $nil (2015 $nil).  These amounts have not been recognised due to uncertainty over the timing of recoverability.  At this time, the Group anticipates that it will maintain the profitability to fully utilize these benefits prior to their expiration date, if any.  During the year, the Group charged $832,000 in United States tax related to the currency effect of intercompany transactions.  This tax charge is a deferred tax that would be payable upon the repayment of the permanent intercompany investments, which the Group does not anticipate occurring.

Earnings per Share

 

Statutory basic earnings per share of 6.0 cent per share compared with basic earnings per share of 6.0 cents per share with fully diluted earnings per share of 5.8 cents per share compared with fully diluted earnings per share of 5.6 cents per share in the prior year.

 

Headcount

 

At 30 June 2016, the Group's headcount stood at 158 employees (2015: 158 employees) which does not include our third party development contractors in Vietnam. This headcount takes into account certain restructuring efforts and the addition of new employees in key regions around the globe in newly created positions to meet future growth. As planned, the Group will continue to increase our investment in new staff during the coming financial year to support growth initiatives in newly de-regulated markets around the world as well as to develop and bring to market our new Merchandise Pricing and Promotion and wholesale/B2B Pricing solutions.

 

Share capital and share options

 

The Group has 33.8 million issued and outstanding shares with another 1.87 million option shares issued under its 2008 unapproved share option scheme and 3.1 million shares issued under the 2013 share option scheme to key employees. These share options, together with any carried forward or exchanged pre-IPO share options, total 12% of the Group's fully diluted share capital at 30 June 2016.

 

Capital expenditure

 

The Group spent $3.8 million in total capital expenditure on equipment and the development of software (2015: $2.6 million). The Group continues to invest into its Kalibrate Cloud platform by adding new enhancements and completing the merging of its Pricing and Planning software into one offering. In addition, the Group has begun the investment into its Merchandise Pricing and Promotion platform and wholesale/B2B Pricing solution.

 

Cash and cash flow

 

Net cash was $2.4 million as at 30 June 2016 (2015: net cash of $4.6 million). Cash was down due to a $3.8 million investment in new product development and equipment, as well as a significant increase in trade and other receivables, as we closed several significant deals at the end of the fiscal year for which we did not receive payment prior to year-end. In addition, the Group entered into several perpetual licence sales wherein the payment of the licences is partly deferred until completion of certain milestones upon which the Group will receive payment.  All significant licence receivables are due from significantly sized and credit worthy clients. To date, the Group has not borrowed on the line of credit and continues to maintain sufficient liquidity.

 

 

Gregg R. Budoi

Chief Financial Officer

19 September 2016

 

 

 

Consolidated Statement of Income

 

 

 

 

 

 

Year

Year

 

 

ended

ended

 

 

30 June

30 June

 

 

2016

2015

Continuing operations

 

$000

$000

Revenue

 

34,895

32,549

Operating expenses

 

(32,293)

(29,319)

Operating profit before share-based payments, business combination amortisation and restructuring costs

 

2,602

3,230

Share-based payments

 

(160)

(170)

Business combination amortisation

 

-

(316)

Restructuring costs

 

(586)

(363)

Operating profit

 

1,856

2,381

Finance income

 

4

18

Finance costs

 

(21)

(62)

Profit before tax

 

1,839

2,337

Income tax (charge)

 

198

(348)

Profit for the financial year

 

2,037

1,989

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

Basic earnings per share (cents)

 

6.04

5.97

Diluted earnings per share (cents)

 

5.78

5.64

 

 

 

Consolidated Statement of Comprehensive Income

 

 

 

 

 

 

Year

Year

 

 

ended

ended

 

 

30 June

30 June

 

 

2016

2015

Continuing operations

 

$000

$000

 

 

 

 

Profit for the financial year

 

2,037

1,989

Other comprehensive income

 

 

 

Items that are or may be reclassified to profit and loss:

 

 

 

Foreign currency translation differences

 

(1,198)

(33)

Tax in respect of foreign currency translation differences

 

(832)

-

Other comprehensive income for the year

 

(2,030)

(33)

Total comprehensive income recognised in the year

 

7

1,956

Attributable to:

 

 

 

Equity holders of the Company

 

7

1,956

 

 

Consolidated Statement of Financial Position

 

 

 

 

 

 

30 June

30 June

 

 

2016

2015

 

 

$000

$000

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

 

564

464

Goodwill

 

2,683

2,683

Other intangible assets

 

5,255

4,031

Deferred tax assets

 

1,540

2,018

 

 

 

 

 

 

10,042

9,196

Current assets

 

 

 

Trade and other receivables

 

15,671

13,072

Cash and cash equivalents

 

2,416

4,612

 

 

18,087

17,684

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

(9,892)

(9,109)

Borrowings

 

(26)

(39)

 

 

(9,918)

(9,148)

Net current assets

 

8,169

8,536

Non-current liabilities

 

 

 

Borrowings

 

(52)

-

 

 

(52)

-

Net assets

 

18,159

17,732

Equity

 

 

 

Capital and reserves attributable to the equity holders of the Company

 

 

 

Share capital

 

112

110

Share premium

 

9,469

9,211

Share-based payment reserve

 

250

372

Foreign exchange reserve

 

(2,109)

(79)

Retained earnings

 

10,437

8,118

Total equity

 

18,159

17,732

 

 

 

Consolidated Statement of Cash flows

 

 

 

 

 

 

Year ended

Year ended

 

 

30 June

30 June

  

 

2016

2015

 

 

$000

$000

 

 

 

Profit/(loss) for the year before taxation

 

1,839

2,337

Adjustments for:

 

 

 

Net finance cost

 

-

44

Depreciation of property, plant and equipment

 

303

283

Amortisation of intangible assets

 

1,399

1,158

Share-based payments

 

160

170

Increase in trade and other receivables

 

(2,121)

(4,678)

Increase/(Decrease) in trade and other payables

 

835

(1,626)

Net cash from operations

 

2,415

(2,312)

Finance costs

 

(21)

(62)

Income tax (paid)

 

198

(152)

Net cash generated from/(used in) operating activities

 

2,592

(2,526)

 

 

 

Finance income

 

4

18

Purchase of property, plant and equipment

 

(429)

(228)

Purchase of intangible assets

 

(3,350)

(2,588)

Net cash used in investing activities

 

(3,775)

(2,798)

 

 

 

Issue of equity (net)

 

2

1

Exercise of share options

 

258

122

Finance lease capital repayments

 

(15)

(30)

Net cash generated from financing activities

 

245

93

 

(938)

(5,231)

Exchange movements

 

(1,258)

110

Cash and cash equivalents at the start of the year

 

4,612

9,733

Cash and cash equivalents at the end of the year

 

2,416

4,612

 

 

 

Consolidated Statement of Changes in Equity

 

 

 

 

Foreign

 

 

 

Share

Share

Other

exchange

Retained

Total

 

capital

premium

reserve

reserve

earnings

equity

 

$000

$000

$000

$000

$000

$000

At 1 July 2014

109

9,061

230

(46)

6,129

15,483

Exercise of options

1

150

(28)

-

-

123

Share-based payment charge

-

-

170

-

-

170

Transactions with owners

1

150

142

-

-

293

Profit for the year

-

-

-

-

1,989

1,989

Foreign exchange movements

-

-

-

(33)

-

(33)

Total comprehensive income

-

-

-

(33)

1,989

1,956

At 30 June 2015

110

9,211

372

(79)

8,118

17,732

Exercise of options

2

258

(282)

-

282

260

Share-based payment charge

-

-

160

-

-

160

Transactions with owners

2

258

(122)

-

282

420

Profit for the year

-

-

-

-

2,037

2,037

Foreign exchange movements

-

-

-

(2,030)

-

(2,030)

Total comprehensive income

-

-

-

(2,030)

2,037

7

At 30 June 2016

112

9,469

250

(2,109)

10,437

18,159

 

 

Notes

 

1 Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for the year ended 30 June 2016 and the year ended 30 June 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial instruments.

 

2 Presentational currency

The consolidated financial statements are presented in US Dollars, which is the presentational currency of the Group. The vast majority of the Group's revenues are US Dollar denominated and, as there is also a growing proportion of US Dollar denominated costs, it is considered to be appropriate to present the Group's results in US Dollars. The functional currency of the Company is Sterling.

 

3 Segmental analysis

The Chief Operating Decision Maker has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to make strategic decisions. The Board considers the business from both an operational and geographical perspective.

 

The segment results for the year ended 30 June 2016 are as follows:

 

Pricing

Planning

Total

 

$000

$000

$000

Revenue

22,231

12,664

34,895

Other operating expenses

(20,050)

(10,548)

(30,598)

Underlying EBITDA

2,181

2,116

4,297

Depreciation and amortisation

(1,454)

(241)

(1,695)

Underlying operating profit

727

1,875

2,602

Share-based payments

 

 

(160)

Exceptional items and business combination amortisation

 

 

(586)

Operating profit

 

 

1,856

Net finance cost

 

 

(17)

Profit before tax

 

 

1,839

Income tax credit

 

 

198

Profit for the year

 

 

2,037

 

The segment results for the year ended 30 June 2015 are as follows:

 

Pricing

Planning

Total

 

$000

$000

$000

Revenue

21,534

11,015

32,549

Other operating expenses

(18,915)

(9,279)

(28,194)

Underlying EBITDA

2,619

1,736

4,355

Depreciation and amortisation

(875)

(250)

(1,125)

Underlying operating profit

1,744

1,486

3,230

Share-based payments

 

 

(170)

Restructuring costs

 

 

(363)

Business combination amortisation

 

 

(316)

Operating profit

 

 

2,381

Net finance cost

 

 

(44)

Profit before tax

 

 

2,337

Income tax charge

 

 

(348)

Profit for the year

 

 

1,989

 

 

 

The segment assets and liabilities at 30 June 2016 are as follows:

 

 

 

Unallocated

 

 

Pricing

Planning

items

Total

 

$000

$000

$000

$000

16,667

4,822

6,640

28,129

Liabilities

(7,449)

(2,521)

-

(9,970)

Net assets

9,218

2,301

6,040

18,159

2,871

908

-

3,779

Depreciation and amortisation

(1,454)

(241)

-

(1,695)

Unallocated assets and liabilities comprise net cash, deferred taxation assets and liabilities, goodwill and acquired intangible assets.

 

The segment assets and liabilities at 30 June 2015 are as follows:

 

 

 

Unallocated

 

 

Pricing

Planning

items

Total

 

$000

$000

$000

$000

13,828

3,739

9,313

26,880

Liabilities

(5,325)

(3,823)

-

(9,148)

Net assets

8,503

(84)

9,313

17,732

2,045

775

-

2,820

Depreciation and amortisation

(875)

(250)

(316)

(1,441)

 

The parent company is domiciled in the UK. The Group's main business segments are based in the following locations:

·   Pricing - North America, Europe and Rest of the World

·   Planning - Rest of the World, North America and Europe

 

The geographical segments are based on an analysis of revenue by the location of the Group's customers as follows:

 

Year ended

Year ended

 

30 June

30 June

 

2016

2015

 

$000

$000

North America

19,168

17,477

Europe

8,354

8,945

Rest of the World

7,373

6,127

Revenue

34,895

32,549

One global client contributed 12 per cent of the Group's revenue (2015: 12 per cent, one global client); no other client contributed greater than 9 per cent of the Group's revenue (2015: 6 per cent).

 

 

4 Restructuring costs and business combination amortisation

 

 

 

 

Year ended

Year ended

 

30 June

30 June

 

2016

2015

 

$000

$000

Restructuring costs

586

363

Business combination amortisation

-

316

 

586

679

Restructuring costs totalling $0.6 million (2016: $0.3 million) within the Group relates to a restructuring plan wherein, the Group eliminated the long term cost associated with a group of employees in order to reallocate the capital resources toward the merchandise pricing offering and our global initiatives that include more global sales, support and thought leadership.

Business combination amortisation in fiscal year 2015 arises from the intangible assets recognised (other than goodwill) from the acquisition of MPSI.

 

5 Earnings per share

 

 

 

 

Year ended

Year ended

 

30 June

30 June

 

2016

2015

 

$000

$000

Profit for the year

2,037

2,042

Share-based payments

160

170

Restructuring costs

586

363

Business combination amortisation

-

316

Adjusted profit for the year

2,783

2,891

 

 

Cents

Cents

Basic earnings per share

6.04

5.97

Diluted earnings per share

5.78

5.64

Adjusted basic earnings per share

8.26

8.52

Adjusted diluted earnings per share

7.90

8.05

 

 

Shares

Shares

Issued ordinary shares at start of the year

33,458,675

33,227,848

Net movement in ordinary shares during the year

341,360

230,827

Issued ordinary shares at end of the year

33,800,035

33,458,675

Weighted average number of shares in issue for the year

33,706,022

33,303,192

Dilutive effect of options

1,534,394

1,939,055

Weighted average shares for diluted earnings per share

35,240,416

35,242,247

  

 

6 Share capital

 

Shares

$000

Issued, called up and fully paid

 

 

Ordinary shares of £0.002 each

 

 

At 1 July 2015

33,458,675

110

Share issue (on exercise)

341,360

2

At 30 June 2015

33,800,035

112

 

During the fiscal year, share options totalling 341,360 shares were exercised (2015, 230,827).

The market price of the Company's shares at 30 June 2016 was £0.675 (2015: £1.025). The range for the year ended 30 June 2016 was £0.675 to £1.13 (2015: £0.955 to £1.325).

 

7 Share-based payments

As part of the change in capital structure relating to the Company's admission to AIM in November 2013 (see note 6), all options issued under the Company's existing unapproved share option scheme were adjusted to maintain a dilutive position. Upon flotation of the Company, all existing share options vested and a proportion of these were exercised by certain of the Group's employees. Additionally, certain of the unexercised share options were exchanged for share options in the Company's new 2013 Enterprise Management Initiative (EMI) scheme. A further 1.75 million share options under the new EMI scheme were also issued to Directors and employees at the date of the flotation.

 

The Company now operates two separate equity settled share option schemes for qualifying employees of the Group; however no further share options are expected to be issued under the 2008 scheme.

 

Options in issue at the year-end are as follows:

 

2008 unapproved share option scheme

 

1 July

 

Option

 

 

30 June

Exercise

Exercisable

Date issued

2014

Granted

adjustment

Exercised

Exchanged

2015

price

from

 

7 Jan 08

1,293,393

-

-

-

-

1,293,393

£0.3288

29 Nov 13

 

9 Sep 08

215,651

-

-

-

-

215,651

£0.3288

29 Nov 13

 

6 Dec 11

254,229

-

-

36,400

-

217,829

£0.4421

29 Nov 13

 

5 Mar 13

145,602

-

-

145,602

-

-

£0.6121

29 Nov 13

 

31 Oct 13

145,602

-

-

-

-

145,602

£0.6121

29 Nov 13

 

 

2,054,477

-

-

182,002

-

1,872,475

 

 

 

                     

The share price at the date of share option exercise was £0.79.

2013 EMI share option scheme

 

1 July

 

 

 

30 June

Exercise

Exercisable

Date issued

2014

Granted

Exercised

Lapsed

2015

price

from

29 Nov 13

169,355

-

-

-

169,355

£0.105

29 Nov 13

29 Nov 13

50,497

-

-

-

50,497

£0.168

29 Nov 13

29 Nov 13

81,439

-

-

-

81,439

£0.168

29 Nov 13

29 Nov 13

1,550,000

-

159,358

133,400

1,257,242

£0.79

29 Nov 16

20 Oct 14

575,000

-

-

75,000

500,000

£1.055

20 Oct 17

7-Nov 14

400,000

 

-

-

400,000

£1.080

7 Nov 17

20-Nov 15

-

545,000

-

-

545,000

£1.945

20 Nov 18

7 Nov 14

-

100,000

-

-

100,000

£0.920

18 Apr 19

 

2,826,291

645,000

159,358

208,400

3,103,533

 

 

The fair value of services received in return for the new share options granted under the 2013 share option scheme are measured by reference to the fair value of share options granted. The estimate of the fair value of services received is based on a Black Scholes share option pricing model. The key assumptions used in the model are as follows:

• interest rate                           -          1.0 per cent;

• volatility                                 -          30 per cent;

• dividend yield                         -          nil; and

• expected life of option             -          3.0 years.

The total expense recognised by the Group for the year, for all continuing schemes, was $160,000 (2015: $170,000).

 

8 Dividends

No dividends were paid or proposed during the year (2015: $nil).

 

9 Forward-looking statements

Certain statements in these results are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements.

 

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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