21 Jul 2015 07:00
Nasstar plc
Trading Statement
21st July 2015
Nasstar plc ("Nasstar", the "Company" or the "Group"; stock code: NASA), a provider of hosted managed and cloud computing services, today issues the following trading update for the half year ended 30 June 2015.
The Group has continued with its integration and go to market strategy; the Board expects results for the half year ended 30 June 2015 to be in line with expectations.
Investment into management resource and skill set has continued in 2015 to both structure the business more effectively and integrate the three subsidiaries, laying a firm foundation for future growth. Further cost consolidation programs have been executed as planned, which included the merging of the two London offices, being the original Nasstar UK Old Street office and the Kamanchi Temple office. The board were able to agree an early termination on the Old Street lease thereby creating savings.
The Directors have continued to focus on each cost line and have made progress with reducing monthly licensing costs associated with the Microsoft product range. The Group has been able to take advantage of consolidating the reporting of the three subsidiaries and negotiate better SPLA (Service Provider Licensing Agreement) costs by switching SPLA licensing partners. This will reduce monthly SPLA licensing costs in the second half of the year.
Furthermore, the Group is part of a select few UK partners that has been invited to join Microsoft's Cloud Solution Provider program. This supplies the Group with a tier one agreement to sell Microsoft's cloud offering known as Office 365. The program enables the Group to supply Office 365 on a true flexible per user per month model, with the Group contracting with the end user and retaining full invoicing and support of the customer. This will enable the Group to further integrate the Office 365 offering into its hosted desktop solution, embracing the innovations of Office 365 as a clear differentiator over its competitors.
The Group's new Head of Sales joined the business in May as planned and is making good progress in continuing to develop and evolve the direct go to market strategy of the Group, embracing the strengths of the three subsidiaries in each of their specialist areas. Since his arrival, the Group has signed agreements with a further three law firms for its fully managed hosted desktop offering whilst also seeing a significant strategic win in the recruitment sector with the signing of APSco, the recognised trade body for professional staffing in the UK and Asia, onto the Kamanchi hosted desktop and fully managed service. In addition he has focused the team on renewals, with the team already achieving the successful three year renewals of four of its top 30 clients.
The second half of the year will however see some unexpected challenges that makes the good progress in the first half even more important. A number of unrelated customer events have taken place that will impact monthly recurring revenues in the second half:
· The largest direct customer of Nasstar (UK) Limited was acquired in August 2014; as a result Nasstar has been informed that IT services will be consolidated into the new owners' operations in the second half of the year.
· The Group's largest customer has signed a direct Enterprise licensing Agreement (EA) with Microsoft for its Office and Exchange licensing in July 2015. This does not see the Group lose the customer and the same services continue to be delivered, however the Group no longer receives licensing revenues and margin for Office and Exchange for this particular customer. It is very unique and unusual for Microsoft to sign an EA with a hosted customer, however the continued growth of the customer meant that an EA was a more cost effective solution than licensing the products on SPLA. This arrangement is only appropriate for businesses with over 1,000 seats, and thus is not a threat to other customers within the Group.
· Reorganisations at two e-know.net customers and one Kamanchi customer has seen user number reductions.
Strong cost and cash control continues and the initiatives in these areas in the first half of the year will help reduce the cumulative impact of these developments, any one of which in isolation would have been insignificant in the context of overall Group performance.
The Board is confident full year results for the Group for 2015 will show good year on year growth, however the outturn for the current year is now expected to fall short of original Board expectations.
Group results for the half year ended 30 June 2015 are expected to be released on 21 September 2015.
For further information, please contact:-
Nasstar plc +44 (0) 1952 225 000
Nigel Redwood, Chief Executive Officer
Niki Redwood, Finance Director
finnCap Limited (Nominated Adviser & Broker) +44 (0) 20 7220 0500
Julian Blunt, James Thompson (Corporate Finance)
Stephen Norcross (Corporate broking)
About Nasstar plc
Nasstar (www.nasstar.com) and its wholly owned subsidiaries e-know.net (www.e-know.net) and Kamanchi (www.kamanchi.co.uk) provide hosted managed and cloud computing services that enable subscribers to access their corporate hosted desktop, files, applications and email in the Cloud rather than using local hard drives. Hosted desktop is a highly scalable service that provides benefits including anywhere access to computing, a standardised corporate desktop solution that can be accessed globally and in multiple languages and cost savings when compared to the traditional IT ownership model, replacing capital expenditure with a simple usage based payment model.
Nasstar (AIM:NASA) was founded in 1998, admitted to AIM in December 2005, acquired e-know.net Limited in a reverse takeover in January 2014 and acquired Kamanchi Limited in July 2014.
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