Final Results

Source: RNS
RNS Number : 8453J
Arcontech Group PLC
22 August 2019
 

ARCONTECH GROUP PLC

 

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

 

Final Results for the year ended 30 June 2019

 

Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, is pleased to announce its final audited results for the year ended 30 June 2019.

 

Financial Highlights:

 

·      Revenue increased by 18% to £2,966,788 (2018: £2,519,699)

·      Profit before tax of £1,057,143 (2018: £575,632)

·      Revenue and profit before and after tax increased by £125,426 on adoption of IFRS 15

·      Cash balances up 27% £4,063,484 (2018: £3,210,058)

·      Fully diluted earnings per share of 8.35p (2018: 7.09p)

·      Final dividend of 2.0 pence per share (2018: 1.3 pence per share)

 

Operational Highlights:

 

·      Doubled number of paying desktop software solution users to 90

·      Sold 300 Excelerators taking total users to 1,410

·      Building a RESTful interface to provide access to more data sources

·      Added new pre-sales resource

·      Strong cash generation and recurring revenue

 

Commenting on the results, Richard Last, Chairman of Arcontech said:

"As a business we face a number of uncertainties: Brexit and changes taking place in the financial markets, as well as with our competitors. However, against this backdrop, our customer relationships remain strong. We are a global business and believe we offer excellent levels of support and operational flexibility as well as significant competitiveness, hence, we would expect to see continued growth, despite the macro climate. Our pipeline of prospects remains positive, albeit, as we have consistently noted, the outlook needs to be tempered by the traditionally long and complex sales cycles that are a feature of our business."

 

 

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

 

Enquiries:

 

Arcontech Group plc

020 7256 2300

Richard Last, Chairman and Non-Executive Director


Matthew Jeffs, Chief Executive




finnCap Ltd (Nomad & Broker)

020 7220 0500

Carl Holmes/Simon Hicks




To access more information on the Group please visit: www.arcontech.com

 



 

Chairman's Statement

 

I am pleased to report another year of progress for Arcontech Group plc ("Arcontech" or the "Company") with good growth in profit before taxation for the year ended 30 June 2019 to £1,057,143 (2018: £575,632), a year-on-year increase of 84% (62% before the adoption of IFRS 15 "Revenue from contracts with customers"). During the year we re-assessed the level of accruals to be carried forward on our balance sheet, as a result of which we have released accruals no longer required of £156,786 (2018: £25,500). After adjusting for release of these accruals, profit before taxation would have been £900,357 (2018: £550,132), an increase of 64% over the previous year (35% before adoption of IFRS 15). This demonstrates the significant profit conversion from increased revenues as we are able to deliver more from our existing and well managed cost base.

 

We achieved a good increase in turnover for the year which grew by 18% to £2,966,788 (2018: £2,519,699) a year-on-year increase of £447,089 (£321,633 before the adoption of IFRS 15). This was achieved primarily through increasing our product sales to existing customers. We sold 300 Excelerators bringing those deployed in our customer base to 1,410 and doubled our Desktop software solution customer base to 90. Whilst sales to new customers have not been significant during the year, our pipeline of opportunities with potential new customers is already proving positive, particularly for our Excelerator and Desktop software products.

 

We believe that fully diluted earnings based on profit before taxation, excluding the release of provisions noted above, provides a better measure of our underlying performance. As at 30 June 2019 Arcontech had tax losses of approximately £8.7m to offset against future trading profits. On this basis earnings (determined as profit before tax, assuming no tax charge/credit for the year,) grew by 58% to 6.73p (36% before adoption of IFRS 15) during the year ended 30 June 2019 (30 June 2018: 4.26p). Based on the actual tax charge, adjusted earnings grew by 4.1% to 7.18p during the year to 30 June 2019 (30 June 2018: 6.90p) reflecting the reduction in the overall tax credit.

 

Financing

As at 30 June 2019 Arcontech had no debt and cash balances of £4,063,484 (2018: £3,210,058) an increase of 27% which represents a cash conversion of adjusted operating profit (determined as operating profit before share-based payments and before the release of accruals for administrative costs in respect of prior years) of 109% (2018: 94%). Arcontech continues to be well financed and has a robust balance sheet which is highly desirable for a small, growing software company.

 

Dividend

I am pleased to announce that subsequent to the year-end we agreed to propose, subject to approval at the Annual General Meeting, to pay a dividend of 2.0 pence per share for the year ended 30 June 2019 (30 June 2018: 1.30 pence), an increase of 54%, to those shareholders on the register as at the close of business on 6 September 2019, with an ex-dividend date of         5 September 2019.

 

Employees

Arcontech has a small, highly effective and committed workforce that is customer focused. Their hard work, continued support and dedication, is greatly appreciated and for which I thank them. I should also like to thank my colleagues on the Board for their continued support.

 

Outlook

As a business we face a number of uncertainties: Brexit and changes taking place in the financial markets, as well as with our competitors. However, against this backdrop, our customer relationships remain strong. We are a global business and believe we offer excellent levels of support and operational flexibility as well as significant competitiveness, hence, we would expect to see continued growth, despite the macro climate. Our pipeline of prospects remains positive, albeit, as we have consistently noted, the outlook needs to be tempered by the traditionally long and complex sales cycles that are a feature of our business.

 

Richard Last

Chairman and Non-Executive Director

 

 



 

Chief Executive's Review

 

I am pleased to report that during the year we maintained our focus on expanding and delivering on the sales pipeline whilst continuing to control costs, which resulted in a profit before tax of £1,057,143 (2018: £575,632), an increase of 84% (2018: 54%) compared to the previous year and a creditable performance by the Group.

 

The year under review saw the two global clients using our Desktop software solution increase their usage and the signing of another client, bringing the total to three, the third being a completely new client. We now have a total of 90 end users (2018: 45) and continue to work with other clients where we are running trials.

 

We also managed to grow our Excelerator end users by just over 300 which, together with our Desktop software solution, means a further 345 end users of Arcontech software.

 

To increase the value provided and therefore the use case for both Excelerator and our Desktop software solution we have also been working with a client on building a RESTful interface which will enable content in JSON and SQL formats to be pulled into our software from the web or intranets to display and use in spreadsheets, templates and charts. This provides a huge increase in the data available to be consumed and can benefit any client.

 

We are also working on our server-side offerings to provide added value. To this end, we have been collaborating with key clients to develop the first iteration of a new GUI for Director, our interface for MVCS and our Cache.

 

Work on improving our sales structure continued too and we have added a pre-sales support function. This role works with sales personnel and their clients as a dedicated resource for technical issues, whereas previously the requirement was fulfilled by support or development staff which interfered with the development process.

 

The length of the sales cycle continues to be longer that we would like, however, we believe the expanded product offering and sales capability should improve the frequency of sales. Coupled with the excellent work of our development and support teams, we continue to build on and broaden our strengths whilst working with our clients to help meet their ever-changing needs.

 

As ever, our overriding focus remains on sales growth and building our pipeline. At the same time, we are continuing to explore opportunities with other organisations that can complement our offerings, whilst remaining alert for strategic acquisition opportunities that will benefit the Group.

 

We look forward to continued growth in the year ahead.

 

Matthew Jeffs

Chief Executive

 

 



 

Strategic Report

 

The Directors present the group strategic report for Arcontech Group plc and its subsidiaries for the year ended 30 June 2019.

 

Principal activities

 

The principal activities of the Company and its subsidiaries during the year were the development and sale of proprietary software and provision of computer consultancy services.

 

Review of the business and prospects

 

A full review of the operations, financial position and prospects of the Group is given in the Chairman's Statement and Chief Executive's Review.

 

Key performance indicators (KPIs)

 

The Directors monitor the business using management reports and information, reviewed and discussed at monthly Board meetings. Financial and non-financial KPIs used in this report include:

 

Financial KPIs:

                                                                                                                                                                               

Revenue £2,966,788 (2018: £2,519,699; 2017: £2,307,751)                  Measurement:

Revenue from sales made to all customers (excluding intra-group sales which eliminate on consolidation)    

Performance:

Continued growth driven by increased sales of our product offering

                                                                                                                               

Adjusted profit £960,675 (2018: £889,584; 2017: £441,996)                Measurement:

Profit after tax and before release of accruals for administrative costs in respect of prior years       

 

Performance:

Continued growth reflects increase in revenues whilst continuing to maintain tight cost control

 

Cash £4,063,484 (2018: £3,210,058; 2017: £2,636,471)                       Measurement:

Cash and cash equivalents held at the end of the year

                                                                                                                 

Performance:

                                                                                                                  The Group continues to maintain healthy cash balances

subject to any exceptional circumstances or acquisition opportunities

 

Earnings per share (basic) 8.46p (2018: 7.14p; 2017: 3.79p)                 Measurement:

Earnings after tax divided by the weighted average number of shares

                                                                                                                 

Performance:

                                                                                                                  Continued growth

 

Earnings per share (diluted) 8.35p (2018: 7.09p; 2017: 3.68p)               Measurement:

Earnings after tax divided by the fully diluted number of shares

 

Performance:

                                                                                                                  Continued growth

 

 

Non-financial KPIs:

 

Staff retention rate (net) 100% (2018: 92%; 2017: 100%)                      Measurement:

Net retention after adjusting for joiners and leavers during the year

 

Performance:

Staff morale from our dedicated employees remains strong, reflected in the stable retention rate

 

Principal risks and uncertainties

 

The Group's performance is affected by a number of risks and uncertainties, which the Board monitor on an ongoing basis in order to identify, manage and minimise their possible impact. General risks and uncertainties include changes in economic conditions, interest rate fluctuations and the impact of competition. The Group's principal risk areas and the action taken to mitigate their outcome are shown below:

 

Risk area

Mitigation



Competition

Ongoing investment in research and development


Responding to the changing needs of clients to remain competitive



Loss of key personnel

Employee share option scheme in place



 

Approved on behalf of the board on 21 August 2019 by:

 

 

 

Matthew Jeffs

Michael Levy

Chief Executive

Group Finance Director

 

 



 

Group Income Statement and Statement of Comprehensive Income

 

For the year ended 30 June 2019

 

 





2019

 


2018

 





£


£








Revenue




2,966,788


2,519,699








Administrative costs




(1,936,829)


(1,958,176)








 

Operating profit




1,029,959


561,523

 

Finance income




27,184


14,109








 

Profit before taxation




1,057,143


575,632








 

Taxation




60,318


339,452

 

Profit for the year after tax




1,117,461


915,084

 

Total comprehensive income for the year




1,117,461


915,084

 

Earnings per share (basic)



 

 

8.46p


7.14p

 

Adjusted* Earnings per share (basic)




7.27p


6.94p

 

Earnings per share (diluted)



 

 

8.35p


7.09p

 

Adjusted* Earnings per share (diluted)




7.18p


6.90p

 

 

*Adjusted for release of accruals for administrative costs of £156,786 (2018: £25,500) in respect of prior years.

 

All of the results relate to continuing operations.

 

 



 

Statement of Changes in Equity

 

For the year ended 30 June 2019

 

Group:

 


Share

capital

Share

premium

Share option reserve

Retained

earnings

Total

equity


£

£

£

£

£

Balance at 30 June 2017

1,562,676

9,802

188,425

1,039,082

2,799,985

 

Profit for the year

-

-

-

915,084

915,084

Total comprehensive income for the year

-

-

-

915,084

915,084







Dividend paid

-

-

-

(125,760)

(125,760)







Issue of shares

88,638

46,579

-

-

135,217

 

Share-based payments

-

-

51,224

-

51,224







Transfer between reserves

-

-

(183,283)

183,283

-

Balance at 30 June 2018

1,651,314

56,381

56,366

2,011,689

3,775,750







Adjustment for adoption of IFRS 15

-

-

-

1,026,119

1,026,119







Profit for the year

-

-

-

1,117,461

1,117,461

Total comprehensive income for the year

-

-


1,117,461

1,117,461







Dividend paid

-

-

-

(171,334)

(171,334)







Share-based payments

-

-

53,857

-

53,857







Transfer between reserves

-

-

(10,576)

10,576

-

Balance at 30 June 2019

1,651,314

56,381

99,647

3,994,511

5,801,853

 

Company:

 


Share

capital

Share

premium

Share option reserve

Retained

earnings

Total

equity


£

£

£

£

£

Balance at 30 June 2017

1,562,676

9,802

188,425

3,062,385

4,823,288







Profit for the year

-

-

-

1,076,709

1,076,709

Total comprehensive expense for the year

-

-

-

1,076,709

1,076,709







Dividend paid

-

-

-

(125,760)

(125,760)







Issue of shares

88,638

46,579

-

-

135,217

 

Share-based payments

-

-

51,224

-

51,224

 

Transfer between reserves

-

-

(183,283)

183,283

-

Balance at 30 June 2018

1,651,314

56,381

56,366

4,196,617

5,960,678







Profit for the year

-

-

-

342,250

342,250

Total comprehensive income for the year

-

-

-

342,250

342,250







Dividend paid

-

-

-

(171,334)

(171,334)







Share-based payments

-

-

53,857

-

53,857







Transfer between reserves

-

-

(10,576)

10,576

-

Balance as at 30 June 2019

1,651,314

56,381

99,647

4,378,109

 6,185,451



Balance Sheet

 

Registered number: 04062416

 

As at 30 June 2019

 











Non-current assets










Goodwill










Property, plant and equipment










Investments in subsidiaries










Deferred tax asset





 

Trade and other receivables





Total non-current assets


2,156,914


2,144,844


2,142,471


2,067,471






Current assets










Trade and other receivables










Cash and cash equivalents


4,063,484


3,210,058


1,078,755


1,458,390

Total current assets


4,327,359


3,520,181


4,152,274


4,030,339










Current liabilities














Trade and other payables


(682,420)


(1,889,275)


(109,294)


(137,132)

Total current liabilities


(682,420)


(1,889,275)


(109,294)


(137,132)










Net current assets


3,644,939


1,630,906


4,042,980


3,893,207










Net assets


5,801,853


3,775,750


6,185,451


5,960,678






Equity










Called up share capital










Share premium account










Share option reserve










Retained earnings


3,994,511


2,011,689


4,378,109


4,196,617



5,801,853


3,775,750


6,185,451


5,960,678

 

 



Group Cash Flow Statement

 

For the year ended 30 June 2019

 



2019


2018




£


£








Cash generated from operations


966,060


482,659








Tax recovered


45,318


69,452








Net cash generated from operating activities


1,011,378


552,111


 

Investing activities












Interest received


27,184


14,109








Purchases of plant and equipment


(13,802)


(2,090)








 

Net cash generated from investing activities


13,382


12,019








Financing activities






 

Issue of shares


-


135,217








Dividend paid


(171,334)


(125,760)








Net cash (invested in)/generated from financing activities


(171,334)


9,457


 

Net increase in cash and cash equivalents


853,426


573,587








Cash and cash equivalents at beginning of year


3,210,058


2,636,471


 

Cash and cash equivalents at end of year


4,063,484


3,210,058




 

Notes to the Financial Statements For the year ended 30 June 2019

 

Status of financial information

 

Arcontech Group plc is a public limited company incorporated in England and Wales whose ordinary shares of £0.125 each are traded on the AIM Market of the London Stock Exchange. The Company's registered office is 1st Floor, 11-21 Paul Street, London, EC2A 4JU.

 

The Board of Directors approved this preliminary announcement on 21 August 2019. Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Company for the years ended 30 June 2019 or 30 June 2018.

 

The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 30 June 2019 or 30 June 2018.

 

The financial information has been extracted from the statutory accounts of the Company for the years ended 30 June 2019 or 30 June 2018. The auditors reported on those accounts; their reports were unqualified and did not contain a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006.

 

The statutory accounts for the year ended 30 June 2018 have been delivered to the Registrar of Companies, whereas those for the year ended 30 June 2019 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

Operating segments:

 

The Group reports internally to the Chief Operating Decision Maker (CODM), who is considered to be the Board. Intersegment license fees and management charges are not included in the reports reviewed by the CODM during the year but are calculated for statutory reporting purposes and therefore are excluded from the following revenue and operating profit disclosures.

 



2019


2018




£


£


Revenue by segment












Software development and licence fees


2,966,788


2,519,699


External segment revenue


2,966,788


2,519,699








Operating profit by segment












Software development and licence fees


1,513,240


1,126,932








Unallocated overheads


(483,281)


(565,409)


Total operating profit


 1,029,959


561,523








Finance income


27,184


14,109


Total profit before tax as reported in the Group income statement


1,057,143


575,632


 

 

 



2019


2018




£


£


Segment total of assets

 






Software development and licence fees


5,196,369


4,090,852








Unallocated assets


4,357,274


4,140,338




9,553,643


8,231,190








Less inter company debtors


 (3,069,370)


(2,566,166)


Total assets


6,484,273


5,665,024


 

 

 

 



2019


2018




£


£


Segment total of liabilities












Software development and licence fees


3,642,199


4,318,229








Unallocated liabilities


109,591


137,212




3,751,790


4,455,441








Less inter company creditors


(3,069,370)


(2,566,166)


Total liabilities


682,420


1,889,275


 



2019


2018




£


£


Additions of property, plant and equipment assets by segment












Software development and licence fees


13,802


2,090


Total additions


13,802


2,090










2019


2018




£


£


Depreciation of property, plant and equipment assets recognised in the period by segment

 






Software development and licence fees


16,732


17,974


Total depreciation


16,732


17,974


 

 

Non-current assets by country


2019


2018




£


£


UK


2,156,914


2,144,844


Total non-current assets


2,156,914


2,144,844


 

 

 

Geographical information - External revenue


2019


2018




£


£


UK


1,997,490


1,669,949


Europe (excluding UK)


822,251


796,468


Africa


45,000


22,562


North America


99,010


28,488


Asia Pacific


3,037


2,232




2,966,788


2,519,699


 

 

During the year there were 4 customers (2018: 3) who accounted for more than 10% of the Group's revenues as follows:

 

 


2019


2018



Value of
sales
£

% of Total

 

 


Value of
sales

£


% of Total

 

 










Customer 1

643,491

22%


620,630


25%


Customer 2

527,145

18%


477,258


19%


Customer 3

378,326

13%


375,219


15%


Customer 4

361,426

12%


96,000


4%



1,910,388

65%


1,569,107


63%


 

These revenues are attributable to the software development and licence fees segment.

 

 

 



 

Earnings per share

 

 



2019


2018




£


£


Earnings






Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders


1,117,461


915,084




1,117,461


915,084


 



No.


No.


Number of shares






Weighted average number of ordinary shares for the purpose of basic earnings per share


13,210,510


12,821,702








Number of dilutive shares under option


165,223


77,699


Weighted average number of ordinary shares for the purposes of dilutive earnings per share


13,375,733


12,899,401


 

The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options.

 

Net cash generated from operations - Group

 


2019


2018


£


£





Operating profit

1,029,959


561,523

Depreciation charge

16,732


17,974

Non cash share option charges

53,857


51,224

Adjustment for adoption of IFRS 15

1,026,119


-

Decrease/(increase) in trade and other receivables

46,248


(134,626)

Decrease in trade and other payables

(1,206,855)


(13,436)





Cash generated from operations

966,060


482,659

 

 

Dividends

 

A final dividend of 2.0 pence will be proposed at the Annual General Meeting but has not been recognised as it requires approval (2018: 1.3 pence).

               

Annual General Meeting

 

The Annual General Meeting of Arcontech Group PLC will be held at the Company's offices, 1st Floor, 11-21 Paul Street, London EC2A 4JU on 3 October 2019 at 10.00 a.m.

               

Annual report and accounts

 

Copies of the annual report and accounts will be sent to shareholders shortly and will be available from the Company Secretary at the Company's registered office at 1st Floor, 11-21 Paul Street, London, EC2A 4JU or from the Company's website at www.arcontech.com


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 CKDDQOBKDAFB