Kinovo Plc Regulatory News (KINO)

6 May 2022

Kinovo plc

("Kinovo" or the "Company")

Year-End Trading Update

Kinovo Plc (AIM: KINO), the specialist property services Group that delivers compliance and sustainability solutions, provides the following trading update for the year ending 31 March 2022.

Trading and Financial Position

In the 12 month period to 31 March 2022 the Company performed well following a year of Covid-related disruption, winning new contracts and revenue streams under its three strategic pillars of Regulation, Regeneration and Renewables. This performance has been achieved despite challenges posed by supply chain disruptions and labour availability. Kinovo has continued to build on its strong client relationships, adding new workstreams under existing contracts due to our track record of delivering excellence in both quality and service.

Revenues, for Continuing operations, during the period increased by 36% to £53.5 million (2021: £39.4 million), while Adjusted EBITDA (after the effect of a charge for lease payments) rose by 100% to £4.2 million (2021: £2.1 million).

Net debt fell to £0.3 million at 31 March 2022 (31 March 2021: £2.7 million) including cash balances of £2.5 million (31 March 2021: £1.3 million).

As mentioned above, the Company won a number of new contracts during the period. The total potential value attributed from new business won during the year could rise to £43.8 million over the life of these contracts.

Update on the disposal of DCB Kent Limited ("DCB")

On 12 January 2022, Kinovo announced the sale of DCB, the Company's non-core construction business (the "Disposal") which was categorised under "Discontinued activities" in the Half Year Results, as published on 7 December 2021.

The Disposal was undertaken to allow the Company to harmonise operations and increase the focus on its three strategic pillars: Regulation, Regeneration and Renewables. These pillars are centred on compliance driven, regulatory-led specialist services that offer long-term contracts, recurring revenue streams and strong cash generation.

Consideration to be received by Kinovo from the Disposal was dependent on the future financial performance of DCB.

Under the terms of the Disposal agreement with the purchasers, the Company agreed to provide a working capital facility to support DCB in completing active projects. The Directors assumed at the time of entering into the Disposal agreement the overall net outflow of cash to support DCB would be minimal, with the initial working capital support necessary to optimise the potential deferred consideration.

The Company has been notified that DCB has experienced delays in completing active projects and has not secured new project work to the levels anticipated at the time of the Disposal and has therefore had to provide unanticipated working capital support to date of £3.7 million, and the Directors expect this to increase in the short term, absent any additional investment into DCB.

This additional support was provided due to a lack of new business receipts, ongoing challenges and delays in the period. As part of our obligation under the terms of the Disposal, the Company provided parent company guarantees which run through to practical completion on each of the construction projects that were in existence at the time of the Disposal. It was, however, anticipated that the purchaser would make all reasonable endeavours to transfer these parent company guarantees post-disposal.

During the year, discontinued activities traded at a loss of £0.5 million. In addition, the pre-tax loss on the disposal of DCB for the Company is expected to be around £5.0 million, which will be taken as a non-underlying exceptional charge. This includes an impairment of £2.3 million of intangible assets relating to goodwill and customer relationships.

The Company as at 30 April 2022, had net cash of £0.4 million (30 September 2021: £1.7m net debt), which includes the impact of the working capital support to DCB. The Company has debt facilities of £5.0 million in place with HSBC UK Bank plc. This debt facility is structured as a £2.5 million term loan, repayable by September 2022, and a £2.5 million overdraft facility. The Company expects to meet financial covenants at the next test, being the year ended 31 March 2022..

There remains significant uncertainty around the amount of further support required to be provided to DCB under the parent company guarantees, and a number of claims and recoveries are being pursued by Kinovo. The Company is currently reviewing its legal position in relation to recoverability of funds provided by way of the working capital support to DCB. A further announcement updating shareholders will be made as and when appropriate. 

David Bullen, Chief Executive Officer of Kinovo plc, commented:

"I am pleased to announce this year-end trading update, with Kinovo's underlying continuing businesses performing well, notwithstanding difficult market conditions. Kinovo is winning new business at a strong rate, and continues to add new revenue streams from existing clients.

Whilst we have incurred a loss on the disposal of DCB, it streamlines our operations and allows us to focus on our core activities of compliance and regulatory work.

Kinovo continues to focus on long-term partnerships and relationships, and currently over 90% of revenue can be attributed to recurring contracts."

Enquiries

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.