LONDON (Alliance News) - Castleton Technology PLC on Tuesday said its pretax loss widened in the first half of the financial year after making two significant acquisitions which helped deliver a large rise in revenue.
The company also said it has issued GBP400,000 worth of convertible loan notes as part of its acquisition of Opus Technology Group Ltd earlier this year, with the conversion price being a significant discount to the company's current share price.
The provider of software and managed services to the public and not-for-profit sectors reported a pretax loss of GBP1.4 million in first half ended September 30, widening from the GBP322,000 loss reported a year earlier despite revenue soaring.
Revenue rose to GBP8.5 million in the first half compared to only GBP1.9 million, pushing gross profit to GBP5.3 million from GBP992,000 and earnings before interest, tax, depreciation and amortisation to GBP1.7 million from a GBP110,000 loss.
However, large rises in amortisation costs and exceptional items widened operating and pretax losses during the period.
Castleton said organic growth over the period was 16%, and 55% of its revenue in the period was recurring, with that set to continue to grow moving forward. Overall revenue was boosted by the company's acquisition of Impact and Brixx back in May for GBP5.0 million each. Since those acquisitions, Castleton has secured 56 new customers to push its customer base to over 450.
"With a strong core of recurring revenue, I am confident we can maintain organic revenue growth whilst we accelerate the number of our customers taking more of our services," said the company.
Integration of those two businesses is "substantially complete". Impact provides IT-based repairs and maintenance work alongside other services, whilst Brixx provides software for users to produce financial models and long-term forecasts.
"Castleton has now put the building blocks in place to become a leading supplier to the public and not-for-profit sectors, specifically the social housing market. The integration of the businesses we've acquired has progressed well. I'm confident that the company will maintain its organic growth, whilst increasing the contribution from providing more of our customers with our broader range of complementary services - and all the time building our core of repeat revenues. I'm excited by our company's potential," said Chairman David Payne.
In a separate statement on Tuesday, Castleton said it has issued GBP400,000 of convertible loan notes to the vendors of Opus Technology Group Ltd, which Castleton acquired back in March, after Opus reported a strong set of results since the acquisition was completed.
Since the acquisition, Opus has obtained six new customers with orders worth a combined GBP500,000. In the year ended September 30, Opus delivered earnings before interest, tax, depreciation and amortisation of GBP200,000, more than three times the amount reported in the previous year, Castleton said.
Furthermore, Castleton said it will pay another GBP100,000 in cash to the Opus vendors split in two equal tranches in January 2016 and January 2017.
The GBP400,000 worth of convertible loan notes can be converted into new Castleton shares for 40.0 pence each in three tranches - a significant discount to the company's current share price.
Castleton shares were down 7.3% to 76.50p on Tuesday morning.
GBP150,000 of the notes can be converted at the end of September 2016, a further GBP150,000 can be converted at the end of September 2017, with the remaining GBP100,000 being converted at the end of September 2018.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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