10 Nov 2014 07:00
7.00 AM
10 NOVEMBER 2014
Grafenia plc
("Grafenia", "the Company" or the "Group")
Unaudited Interim Results for the period ended 30 September 2014
Financial Highlights | Six months to | Six months to | |
30 September | 30 September | ||
2014 | 2013 | Change | |
Turnover | £8.50m | £10.08m | -15.7% |
EBITDA | £1.22m | £1.29m | -5.4% |
Profit before tax | £0.37m | £0.31m | +19.4% |
EPS - Basic | 0.78p | 0.56p | +39.3% |
EPS - Fully Diluted | 0.78p | 0.56p | +39.3% |
Dividend | 0.50p | 0.33p | +51.5% |
Capital Expenditure | £0.60m | £0.60m | |
Net Cash | £1.08m | £0.53m | |
Net Funds* | £1.06m | £0.48m | |
*Net funds is the net of cash and cash equivalents less other interest bearing loans and borrowings
Operational highlights
· Profit Before Tax up 19.4%
· Cash generated from operations up 89.7%
· Interim Dividend up 51.5%
· Nettl launched (Printing.com Birmingham converted, its sales increased 30%)
· Marqetspace attracts 400+ graphic professional clients
For further information:
Grafenia plc Tony Rafferty (Chief Executive) Alan Roberts (Finance Director) |
07966 517 336 0161 848 5713 |
N+1 Singer (Nominated Adviser) Richard Lindley James White |
0207 496 3170 0207 496 3171 |
Chairman's & Chief Executive's Statement
Trading Results, Cash and Dividend
Group turnover during the six month period was £8.50m (2013: £10.08m) a decline of 15.7% compared to the corresponding period last year. EBITDA was £1.22m (2013: £1.29m), a decrease of 5.4%. However, pre tax profit increased by 19.4% to £0.37m (2013: £0.31m).
At 30 September 2014, the Company had an improved net cash position of £1.06m (2013: £0.48m). This reflected cash generated by operating activities increasing to £0.74m (2013: £0.39m). A Final Dividend of £0.47m was paid in the period (2013: £0.71m). During the period working capital increased by £0.40m (2013: £0.85m) and capital expenditure was £0.60m (2013: £0.60m), the total reflecting the ongoing investment in the Company's software that underpins the new developments.
Dividend
The Directors are declaring an Interim Dividend of 0.50p per share (2013: 0.33p) to be paid on 5 December 2014 to shareholders on the register at 14 November 2014.
Trading Review
Sale of Printing
Print revenues contracted from £9.51m to £7.86m. Printing.com's UK and Irish Franchise network generated print revenues of £3.26m (2013: £4.39m). This decline was mitigated in part by the growth in revenues to £0.51m (2013: £0.23m) from legacy Printing.com franchisees who converted to the W3P format.
Whilst the Printing.com franchise remains an important and cherished formula, we are very mindful that the retail print market is changing, hence the reason we have developed the Nettl formula to potentially supersede the Group's retail offering.
W3P was launched as a white label alternative to the Printing.com franchise but has progressed to be a stand-alone web-2-print SaaS formula for printers, print brokers and the like. W3P has gained traction in terms of the number of users but print volume via the W3P channel has been lower than envisaged. Accordingly, and to drive print volumes via graphic professionals, we launched Marqetspace during the period. Print revenue from W3P users (excluding legacy franchises) and Marqetspace together increased to £0.29m (2013: £0.13m).
Whilst Marqetspace orders are transacted on-line, the service is promoted to graphic professionals via traditional mechanisms. Since its inception in June 2014, over 400 graphic professionals have utilised this service and we anticipate this figure continuing to grow month on month.
The Group's Dutch and Belgian channels (Flyerzone and Drukland) generated £3.04m of revenues (2013: £3.65m). The Dutch market in particular has become increasingly competitive during the period, resulting in lower volumes, with a strengthening of sterling versus the euro impacting further.
Revenue from BrandDemand held steady at £0.33m (2013: £0.31m). Flyerzone.co.uk and Flyerzone.ie, the online only formulas, generated lower revenues of £0.33m (2013: £0.57m). In the case of Flyerzone we have made the decision not to chase volume unduly at the expense of operating margin. Revenue from the Group's operations in France contracted slightly to £0.22m (2013: £0.26m).
License Fees
Overall revenue from License Fees increased to £0.64m (2013: £0.57m).
At the close of the period the number of subscribing W3P users had increased to 94 with 24 franchise partners also utilising the W3Shop component.
During the period an additional two international master licences were granted. The master licence partners in question (along with the similar agreement granted prior to the start of the interim period) all operate significant and sophisticated print businesses in their respective countries. We believe their decision to license the W3P platform reflects the pertinence of the product in the international marketplace.
Revenue from TemplateCloud increased marginally to £0.09m (2013: £0.08m).
Nettl
In June 2014 we reported the development of the Nettl franchise format. Nettl provides websites, webshops and online 'apps' in addition to the Printing.com type solutions. Nettl has been developed because we believe that for many SME type clients online promotion is an area of increasing marketing spend whereas print is an area of decreasing marketing spend.
Printing.com Birmingham converted to Nettl in September 2014. Sales of websites and webshops during the first two months of operation are encouraging and orders put in hand have augmented underlying sales by some 30%. The Group's Printing.com stores in London, Dublin and Manchester have now converted to Nettl and have commenced selling online solutions to their clients.
Nettl is being offered to franchisees. In comparison to Printing.com Nettl charges significantly higher fees that reflect the sophistication of the Nettl systems and the greater scope for value adding by the franchisee. We are encouraged by the initial presentations of the Nettl franchise and anticipate that the first contracts will be signed over the coming weeks. By the close of the 4th quarter of the current year we believe that a network of 25+ Nettls will have evolved.
Outlook
Post the interim period trading has continued in a similar manner. We are mindful that the traditional retail print market is in demise and cautious in that our on-line channels operate in competitive markets that are fickle with little brand loyalty.
However, in the UK the Marqetspace formula has shown encouraging promise. This reflects the number of new clients being gained on a daily basis, the yield per client and the cost of client acquisition which encourages us to believe that Marqetspace is scaleable. To this end we believe it is realistic that on an 'annualised monthly' run rate Marqetspace will exceed £1m by March 2015.
The foundation of Grafenia plc was the Printing.com franchise format. In Nettl we believe we have a formula that by the close of the current financial year will have gained significant traction.
The increase in the interim dividend reflects our cautious optimisim about the prospects of Grafenia moving forward.
Les Wheatley Chairman 10 November 2014 | Tony Rafferty Chief Executive 10 November 2014 |
Unaudited Interim Results for the period ended 30 September 2014
Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2014
Note | Unaudited | Unaudited | ||
| Six months to 30 September 2014 | Six months to 30 September 2013 | Year ended 31 March 2014 | |
£000 | £000 | £000 | ||
Revenue | 3 | 8,502 | 10,078 | 19,443 |
Raw materials and consumables used | (3,498) | (4,431) | (8,539) | |
Gross profit | 5,004 | 5,647 | 10,904 | |
Staff costs | (2,351) | (2,634) | (4,803) | |
Other operating charges | (1,430) | (1,722) | (3,451) | |
Depreciation and amortisation | (847) | (986) | (1,839) | |
Operating profit | 376 | 305 | 811 | |
Financial income | 2 | 3 | 3 | |
Financial expenses | (7) | (3) | (59) | |
Net financing(expense)/income | (5) | - | (56) | |
Profit before tax | 371 | 305 | 755 | |
Taxation | 4 | (2) | (37) | 108 |
Profit for the period | 369 | 268 | 863 | |
Other comprehensive income for the period | - | - | - | |
Total comprehensive income for the period | 369
| 268 | 863 | |
Basic earnings per share | 5 | 0.78p | 0.56p | 1.82p |
Diluted earnings per share | 5 | 0.78p | 0.56p | 1.82p |
Consolidated Statement of Financial Position
at 30 September 2014
Unaudited | Unaudited | ||
30 September 2014 | 30 September 2013 | 31 March 2014 | |
£000 | £000 | £000 | |
Non-current assets | |||
Property, plant and equipment | 1,272 | 1,785 | 1,499 |
Intangible assets | 4,371 | 4,464 | 4,406 |
Deferred tax assets | - | 2 | - |
Other receivables | 40 | 67 | 53 |
Total non-current assets | 5,683 | 6,318 | 5,958 |
Current assets | |||
Inventories | 172 | 160 | 168 |
Trade and other receivables | 2,215 | 2,537 | 2,244 |
Cash and cash equivalents | 1,077 | 529 | 1,401 |
Total current assets | 3,464 | 3,226 | 3,813 |
Total assets | 9,147 | 9,544 | 9,771 |
Current liabilities | |||
Other interest-bearing loans and borrowings | (20) | (25) | - |
Trade and other payables | (1,507) | (2,101) | (1,793) |
Current tax payable | (211) | (151) | (282) |
Accruals and deferred income | (1,112) | (1,137) | (1,147) |
Other liabilities | (225) | (213) | (375) |
Total current liabilities | (3,075) | (3,627) | (3,597) |
Non-current liabilities | |||
Other interest-bearing loans and borrowings | - | (22) | - |
Deferred tax liabilities | (363) | (453) | (363) |
Total non-current liabilities | (363) | (475) | (363) |
Total liabilities | (3,438) | (4,102) | (3,960) |
Net assets | 5,709 | 5,442 | 5,811 |
Equity | |||
Share capital | 475 | 475 | 475 |
Merger reserve | 838 | 838 | 838 |
Retained earnings | 4,396 | 4,129 | 4,498 |
Total equity | 5,709 | 5,442 | 5,811 |
|
|
|
Consolidated Statement of Changes in Shareholders Equity
for the six months ended 30 September 2014 (unaudited)
Share Capital | Share Premium | Merger Reserve | Retained earnings |
Total | |
£000 | £000 | £000 | £000 | £000 | |
Opening shareholders' funds at 1 April 2013 | 475 | - | 838 | 4,590 | 5,903 |
Profit for the period | - | - | - | 268 | 268 |
Dividends paid | - | - | - | (713) | (713) |
Total recognised income and (expense) | - | - | - | (445) | (445) |
Capital Restructuring | - | - | - | (16) | (16) |
|
|
|
|
| |
Total movement in equity | - | - | - | (461) | (461) |
Closing shareholders' funds at 30 September 2013 | 475 | - | 838 | 4,129 | 5,442 |
Opening shareholders' funds at 1 October 2013 | 475 | - | 838 | 4,129 | 5,442 |
Profit for the period | - | - | - | 595 | 595 |
Dividends paid | - | - | - | (157) | (157) |
Total recognised income and (expense) | - | - | - | 438 | 438 |
Own shares acquired | - | - | - | (69) | (69) |
Total movement in equity | - | - | - | 369 | 369 |
Closing shareholders' funds at 31 March 2014 | 475 | - | 838 | 4,498 | 5,811 |
Opening shareholders' funds at 1 April 2014 | 475 | - | 838 | 4,498 | 5,811 |
Profit for the period | - | - | - | 369 | 369 |
Dividends paid | - | - | - | (471) | (471) |
Total recognised income and (expense) | - | - | - | (102) | (102) |
Total movement in equity | - | - | - | (102) | (102) |
Closing shareholders' funds at 30 September 2014 | 475 | - | 838 | 4,396 | 5,709 |
Consolidated Statement of Cash Flows
for the six months ended 30 September 2014
Unaudited | Unaudited | ||
Six months to 30 September 2014 | Six months to 30 September 2013 | Year ended 31 March 2014 | |
£000 | £000 | £000 | |
Cash flows from operating activities | |||
Profit for the period | 369 | 268 | 863 |
Adjustments for: | |||
Depreciation, amortisation and impairment | 847 | 986 | 1,839 |
(Profit) on sales of equipment. | - | - | (7) |
Net finance expense/(income) | 5 | - | 56 |
Exchange (loss)/gain | (7) | - | (59) |
Taxation | 2 | 37 | (108) |
Operating cash flow before changes in working capital and provisions | 1,216 | 1,291 | 2,584 |
Change in trade and other receivables | 42 | (61) | 246 |
Change in inventories | (4) | 23 | 15 |
Change in trade and other payables | (439) | (815) | (983) |
Cash generated from the operations | 815 | 438 | 1,862 |
Interest paid | - | (3) | (8) |
Tax (paid)/received | (73) | (43) | 145 |
Net cash inflow from operating activities | 742 | 392 | 1,999 |
Cash flows from investing activities | |||
Interest received | 2 | 3 | 11 |
Proceeds from sale of plant and equipment | 5 | 21 | 76 |
Acquisition of plant and equipment | (83) | (143) | (214) |
Capitalised development expenditure | (231) | (194) | (440) |
Acquisition of other intangible assets | (287) | (261) | (506) |
Net cash used in investing activities | (594) | (574) | (1,073) |
Cash flows from financing activities | |||
Purchase of own shares | - | - | (69) |
Proceeds from supplier finance | - | 52 | 52 |
Payment of supplier finance | (12) | (5) | (20) |
Repayment of Loan notes | - | (16) | (16) |
Repayment of Bank Loans | - | (23) | (23) |
Payment of equity dividend | (471) | (713) | (870) |
Net cash outflow from financing activities | (483) | (705) | (946) |
Net decrease in cash and cash equivalents | (335) | (887) | (20) |
Exchange differences on cash and cash equivalents | 11 | (1) | 4 |
Cash and cash equivalents at start of period | 1,401 | 1,417 | 1,417 |
Cash and cash equivalents at end of period | 1,077 | 529 | 1,401 |
Notes
(forming part of the interim financial statements)
1 Basis of preparation
Grafenia plc (the "Company") is a company incorporated and domiciled in the UK.
These financial statements do not include all information required for full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 March 2014.
The comparative figures for the year ended 31 March 2014 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors 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.
These condensed consolidated interim financial statements were approved by the Board of Directors on 10 November 2014.
2 Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2014.
3 Segmental information
The Group's primary operating segments are geographic being UK & Ireland, Europe and others. The secondary segmental analysis is by nature of service.
This disclosure correlates with the information which is presented to the Chief Operating Decision Maker, the Chief Executive (CEO), who reviews revenue (which is considered to be the primary growth indicator) by segment. The Group's costs, finance income, tax charges, non-current liabilities, net assets and capital expenditure are only reviewed by the CEO at a consolidated level and therefore have not been allocated between segments in the analysis below.
Analysis by location of sales
Period ended 30 September 2014 | UK & Ireland | Europe | Other | Total |
£000 | £000 | £000 | £000 | |
Segment revenues | 5,002 | 3,272 | 228 | 8,502 |
|
|
|
| |
Operating Expenses | (8,126) | |||
Results from operating activities | 376 | |||
Net finance expense | (5) | |||
Profit before tax | 371 | |||
Tax | (2) | |||
Profit for the period | 369 | |||
Assets | ||||
Unallocated net assets | 5,709 |
Analysis by location of sales
Period ended 30 September 2013 | UK & Ireland | Europe | Other | Total |
£000 | £000 | £000 | £000 | |
Segment revenues | 6,008 | 3,920 | 150 | 10,078 |
|
|
|
| |
Operating Expenses | (9,773) | |||
Results from operating activities | 305 | |||
Net finance income | - | |||
Profit before tax | 305 | |||
Tax | (37) | |||
Profit for the period | 268 | |||
Assets | ||||
Unallocated net assets | 5,442 |
Analysis by type
Period ended 30 September 2014 | Print Online | Printing | Licence | Total |
£000 | £000 | £000 | £000 | |
Segment revenues | 4,090 | 3,772 | 640 | 8,502 |
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|
|
| |
Operating Expenses | (8,126) | |||
Results from operating activities | 376 | |||
Net finance expense | (5) | |||
Profit before tax | 371 | |||
Tax | (2) | |||
Profit for the period | 369 | |||
Assets | ||||
Unallocated net assets | 5,709 |
Analysis by type (continued)
Period ended 30 September 2013 | Print Online | Printing | Licence | Total |
£000 | £000 | £000 | £000 | |
Segment revenues | 4,793 | 4,718 | 567 | 10,078 |
|
|
|
| |
Operating Expenses | (9,773) | |||
Results from operating activities | 305 | |||
Net finance expense | - | |||
Profit before tax | 305 | |||
Tax | (37) | |||
Profit for the period | 268 | |||
Assets | ||||
Unallocated net assets | 5,442 |
The comparator segment revenue categories have been restated to the format of the current year presentation.
4 Taxation
The tax charge is based on the base tax rate of 21% (six month period ended 30 September 2013: 23%, year to 31 March 2014 23%) adjusted for UK R&D Tax claims for the 2014 year and Tax paid in other countries.
5 Earnings per share
The calculation of the basic earnings per share is based on the profit after taxation divided by the weighted average number of shares in issue, being 47,071,835 (period ended 30 September 2013 47,557,835; year ended 31 March 2014: 47,479,060).
The diluted earnings per share takes the weighted average number of ordinary shares in issue during the period and adjusts this for dilutive impact of share options existing at the period end. The diluted weighted average number of shares in the period ended 30 September 2014 was 47,071,835 (period ended 30 September 2013: 47,607,835; year ended 31 March 2014 47,479,060). The profit used in the diluted earnings per share is based on profit after taxation.
The Company's half yearly report will shortly be available on the Company's website www.grafenia.com.
Independent Review Report to Grafenia plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 September 2014 which comprises the Consolidated Statement of Financial Position, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Shareholders' equity, the Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.
The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the AIM Rules.
Mick Davies
for and on behalf of KPMG LLP
Chartered Accountants
St James' Square
Manchester, M2 6DS