IBPO.L Regulatory News (IBPO)

iEnergizer Limited and its subsidiaries

Unaudited Condensed Consolidated Interim Financial Statements

30 September 2015 and 2014

13 November 2015

iEnergizer Limited

("iEnergizer" or "the Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

iEnergizer is pleased to announce its Interim Results for the six months ended 30 September 2015. iEnergizer is a digital publishing and technology leader, which benefits from the dual disruptive waves of big data and the cloud. The present structure of the group combines a well-established, high growth, business process solution enterprise with a leading provider of end-to-end digital transformation solutions to the media and publishing industries.

Financial Highlights

· Revenues of $68.9m (H1 2015: $76.1m)

· Adjusted EBITDA1 $16.6m (H1 2015: $14.9m)

· Adjusted EBITDA1 margin at 24.1% (H1 2015: 19.6%)

· Operating profit $13.7m (H1 2015: $9.8m)

· Operating profit margin at 19.9% (H1 2015: 12.9%)

· Cash and cash equivalents of $7.7m (31 March 2015: $13.5m)

· Term Debt of $94.0m (31 March 2015: $109.0m). The Company is compliant of all applicable financial covenants including on-time payments of loan instalments and interest.

(1) Non-recurring expenses relate to one off costs of US$ 0.3mn for professional charges.

Operational Highlights

· Focus on profitable growth

o Delivered 40% improvement to operating profit ($13.7m H1 2016, $9.8m H1 2015.)

· Implementation of further best practices and leaner processes throughout the Content services division

o Ensured return to profit in the division, with improved segment operating margin (16.8% H1 2016, -6.7% H1 2015)

· Decline in aggregate revenue in project-driven content services, as expected ($39.7m H1 2016, $45.1m H1 2015)

o Successful completion of a digital solutions project, including digitization of a sophisticated online library, impacted revenue by $3.3m

o Reduction in financial publishing, in line with reduced workflow, reduced revenues by $2.1m

· Sustainable long term growth prospects for content services division

o World economy's irreversible shift to the digital sphere

o iEnergizer provides cutting edge technology for clients

· Confident outlook of returning to the previous growth trajectory in FY 2017

o High level of customer demand for social engagement and digital products, particularly in the focused verticals of education and professional publishing, and enterprise learning and development.

· Real Time Processing ("RTP"): Continued strong revenue growth, of 10.4%

· Back Office Services: Tough comparable period in Back Office Services ("BOS") due to a one-off project

o Expectation to resume growth momentum in this division

· Focused cost saving initiatives increased EBITDA and operating profit margins:

o Running a leaner organization using technology effectively and optimising utilization of the Company's resources

o Consolidation of the content services division into the Company's low cost effective operations centre in Noida, India

o Rationalizing SG&A costs including leveraging the Company's US based sales team for generating sales pipeline and cross-selling opportunities for all the business verticals of the Group.

· Continued focus on recurring revenue streams from business critical processes and long term customer relationships

Marc Vassanelli, Chairman of iEnergizer, commented:

"Following the management actions to consolidate our operations in the prior year, we are pleased with the performance in the first half of this financial year, demonstrated by the better operating margins achieved.

"The Company's healthy cash position, together with its cash generative business model, puts the Company in a strong position to invest in both organic and inorganic growth opportunities.

"We expect current trends to continue with full year revenues in line with last year and an improvement in underlying operating margins. We believe there is significant opportunity for us to continue to expand the business further using this approach."

-Ends-

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iEnergizer Limited and its subsidiaries

Unaudited Condensed Consolidated Interim Financial Statements 

Prepared in accordance with International Financial Reporting Standards (IFRS)

Six months ended 30 September 2015 and 2014

Unaudited Condensed Consolidated Statements of Financial Position

(All amounts in United States Dollars, unless otherwise stated)

(The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements)

 Unaudited Condensed Consolidated Income Statements

(All amounts in United States Dollars, unless otherwise stated)

(The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements)

Unaudited Condensed Consolidated Statements of Other Comprehensive Income

(All amounts in United States Dollars, unless otherwise stated)

(The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements)

Unaudited Condensed Consolidated Statements of Changes in Equity

 (All amounts in United States Dollars, unless otherwise stated)

Unaudited Condensed Consolidated Statements of Changes in Equity

 (All amounts in United States Dollars, unless otherwise stated)

 (The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements)

Unaudited Condensed Consolidated Statements of Cash Flows

(All amounts in United States Dollars, unless otherwise stated)

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(All amounts in United States Dollars, unless otherwise stated)

1. INTRODUCTION

iEnergizer Limited (the 'Company' or 'iEnergizer ') was incorporated in Guernsey on 12 May 2010 pursuant to the Act of Royal Court of the Island of Guernsey.

iEnergizer Limited is a 'Company limited by shares' and is domiciled in Guernsey. The registered office of the Company is located at Mont Crevelt House, Bulwer Avenue, St. Sampson, Guernsey, GY2 4 LH. iEnergizer was listed on the Alternative Investment Market ('AIM') of London Stock Exchange on 14 September 2010.

iEnergizer through its subsidiaries iEnergizer Holdings Limited, iEnergizer Group FZ - LLC, iEnergizer IT Services Private Limited, iEnergizer Management Services Limited, iEnergizer BPO Limited, iEnergizer Aptara Limited and Aptara Inc and subsidiaries. (together the 'Group') is engaged in the business of call centre operations, providing business process outsourcing (BPO) and content delivery services, and back office services to their customers, who are primarily based in the United States of America and India, from its operating offices in Mauritius and India.

2. GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS

These Unaudited Condensed Consolidated Interim Financial Statements are for the six months ended 30 September 2015 and 2014. They have been prepared in accordance with IAS 34 Interim Financial Reporting as developed and published by the International Accounting Standards Board ('IASB'), on a going concern basis. They do not include all of the information required in annual financial statements in accordance with IFRS, and should be read in conjunction with the annual financial statements for the years ended 31 March 2015 and 2014.

The Unaudited Condensed Consolidated Interim Financial Statements have been prepared and presented in United States Dollar (US$) which is the Company's functional currency.

These Unaudited Condensed Consolidated Interim Financial Statements were approved by the Board on 12 November 2015.

The Group has applied the same accounting policies in preparing these unaudited management financial information as adopted in the most recent annual audited financial information of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The interim financial statements have been prepared in accordance with the accounting policies adopted in the Group's most recent annual financial statements for the years ended 31 March 2015 and 2014.

Standards issued but not yet effective

· IFRS 9 Financial instruments

In July 2014, the International Accounting Standards Board issued the final version of IFRS9, Financial Instruments. The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share - by-share basis, to presentable fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity's own credit risk in the other comprehensive income.

IFRS 9 replaces the 'incurred loss model' in IAS 39 with an 'expected credit loss' model. The measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure requirements.

The effective date for adoption of IFRS 9 is annual periods beginning on or after January 1, 2018, though early adoption is permitted. The Group is currently evaluating the requirements of IFRS 9 and the impact on the consolidated financial statements.

· IFRS 15 Revenue from Contract with Customers

In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts with customers. The standard permits the use of either the retrospective or cumulative effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on or after January 1, 2017, though early adoption is permitted.

In September 2015, the IASB issued an amendment to IFRS 15, deferring the adoption of the standard to periods beginning on or after January 1, 2018 instead of January 1, 2017. The Group is currently evaluating the impact of this new standard on the Group's consolidated financial statements.

4. SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES AND ESTIMATION UNCERTAINTY

When preparing the Unaudited Condensed Consolidated Interim Financial Statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

The judgements, estimates and assumptions applied in the Unaudited Condensed Consolidated Interim Financial Statements, including the key sources of estimation uncertainty were the same as those applied in the Group's last audited financial statements for the year ended 31 March 2015.

5. GOODWILL

The net carrying amount of goodwill can be analysed as follows:

6. OTHER INTANGIBLE ASSETS

The Intangible assets comprise of computer software, customer contracts.

*Customer contracts are basically intangible assets created for long standing customer relationships in content delivery segment. The relationships are in existence from last many years and continuing. Once the relationship is established the work continues to flow on a year to year basis. The carrying amount of such contracts is USD 10,654,396 and remaining amortisation period is 4.8 years.

*Customer contracts are basically intangible assets created for long standing customer relationships in content delivery segment. The relationships are in existence from last many years and continuing. Once the relationship is established the work continues to flow on a year to year basis. The carrying amount of such contracts is USD 9,264,688 and remaining amortisation period is 4.3 years. 

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise of the following:

8. SHORT TERM FINANCIAL ASSETS

Short term investments comprise of investment through banks in deposits denominated in various currency units bearing fixed rate of interest.

9. ISSUE OF SHARE CAPITAL

The Company had executed a Term Loan B facility for a six year senior secured term loan facility ("the Facility") for an aggregate amount of US$135 million in 2013. Considering the audited results of the Company for the financial year ended 31 March 2015, which were announced on 2 July 2015, the Company required cash injection in order to comply with the terms of the Facility.

Accordingly, the Company has issued 15,120,000 and 22,000,008 new ordinary shares on 7 July 2015 and 17 July 2015 respectively of 1 Pence each to EICR Cyprus Limited ("EICR") for US$ 5,023,169. Following the Placing the Company will have 190,130,008 ordinary shares in issue.

Subsequently, the Company repaid US$3,300,000 towards the principal payment of Facility during July 2015 and further US$4,700,000 during August 2015.

10. EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the profits attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

Calculation of basic and diluted profit per share for the period ended 30 September 2015 is as follows:

Basic earnings per share

Diluted earnings per share

* Shares to be issued under share options granted. These are anti-dilutive in nature and hence, not considered for the calculation of potential ordinary shares.

11. RELATED PARTY TRANSACTIONS

The related parties for each of the entities in the Group have been summarised in the table below:

Disclosure of transactions between the Group and related parties and the outstanding balances is as under:

Transactions with parent company

Transactions with KMP and relative of KMP

12. SEGMENT REPORTING

Management currently identifies the Group's three services lines real time processing, back office services and content delivery as operating segments on the basis of operations. These operating segments are monitored and strategic decisions are made on the basis of adjusted segment operating results.

The Chief Operating Decision Maker ("CODM") evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Group's reportable segments are as follows:

1. Real time processing

2. Back office services

3. Content delivery

4. Others

The measurement of each segment's revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the Unaudited Condensed Consolidated Interim Financial Statements. In addition, two minor operating segments, for which the quantitative thresholds have not been met, are currently combined below under 'Others'. Segment information can be analysed as follows for the reporting periods under review:

Revenue from the following customer's amounts to more than 10% of consolidated revenue during the period presented.

13. FINANCIAL ASSETS AND LIABILITIES

Fair value of carrying amounts of assets and liabilities presented in the statement of financial position relates to the following categories of assets and liabilities:

These non-current financial assets and liabilities, current financial assets and liabilities have been recorded at their respective carrying amounts as the management considers the fair values to be not materially different from their carrying amounts recognised in the statement of financial positions as these are expected to realise within one year from the reporting dates. Derivative financial instruments, recorded at fair value through profit and loss, are recorded at their respective fair values on the reporting dates.

14. FAIR VALUE HIERARCHY

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

No financial assets/liabilities have been valued using level 1 and 3 fair value measurements.

The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis:

15. COMMITMENT AND CONTINGENCIES

As at 30 September 2015 and 31 March 2015, the Group had a capital commitment of USD 54,237 and USD 96,671 respectively for acquisition of property, plant and equipment.

The contingent liability in respect of claims filed by erstwhile employees against the group companies amounts to USD 72,986 and USD 74,869 as on 30 September 2015 and 31 March 2015 respectively and in respect of interest on VAT amounts to USD 10,557 as on 30 September 2015 (USD 11,166 as on 31 March 2015).

Guarantees: As at 30 September 2015 and 31 March 2015, guarantees provided by banks on behalf of the group companies to the revenue authorities and certain other agencies, amount to approximately USD 119,615 and USD 126,516 respectively.

16. ESTIMATES

The preparation of interim financial statements require management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these Unaudited Condensed Consolidated Interim Financial Statements, the significant judgments made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the years ended 31 March 2015 and 2014.

17. FINANCIAL RISK MANAGEMENT

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the years ended 31 March 2015 and 2014.