07:00 Tue 15 Sep 2020
Kape Technologies - Half-year Results
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014
("
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED
Financial highlights
· Increasing global demand for online security and privacy solutions continues to underpin strong financial progress and user growth:
o Revenues increased 97% to
o Strong growth in recurring revenues to
o Organic revenue growth in the Digital Privacy segment excluding PIA was 47% in the period, $17.9 million (H1 2019:
o Adjusted EBITDA[1] up 185% to
o Operating Profit up 142% to
o Increase of 142% in Adjusted Earnings Per Share2 to 6.3 cents (H1 2019: 2.6 cents)
o Strong cash generation; adjusted operating cashflow of
o Secured a new senior term loan and revolving credit facilities of up to
· Trading towards the upper range of management's expectations
Operational highlights
· Significant product launches across both the Digital Privacy and Digital Security divisions in the period include:
o The beta CyberGhost 8 Privacy Suite and the introduction of new product verticals including End Point Security, Privacy Guard and Security Updater
o A new Endpoint Security for Windows integrated into Microsoft Virus Initiative program and as well as a new privacy browser extension for Chrome, Firefox, and Edge
o The encrypted WireGuard protocol across the Digital Privacy division - an 'industry first'
· Visibility over revenues from existing users increased to $106.6 million (
· Maintained a consistently high level of user retention of 80% (
· Integration of PIA progressing rapidly and expected to complete in the second half of 2020.
· On track to achieve a 40% reduction in PIA's monthly operating costs in Q3 2020 as part of the integration
· Enlarged group already benefiting from increased economies of scale and expected to deliver synergies towards the upper end of the previous
Outlook
·
· Since period end the Group has experienced strong growth in PIA subscribers, driven by
· The board remains confident of the Group achieving revenues of between
"The first six months of 2020 have been extremely productive for
"As anticipated, the acquisition of PIA has accelerated our progress and our teams have seamlessly brought our two organisations together creating a truly global leader.
"We remain focused on delivering against our strategic growth priorities in the second half and look to the future with confidence."
An audio webcast of
1Adjusted EBITDA is a non GAAP measure and a company specific measure which excludes other operating income and expenses which are considered to be one off and non-recurring in nature.
2 Adjusted EPS was calculated from the earnings per share adding back, share-based payments and non-recurring costs
Enquiries:
|
via |
Shore Capital (Nominated Adviser & Broker)
|
+44 (0)20 7408 4090 |
N+1 Singer (Joint Broker)
|
+44 (0) 20 7496 3000 |
|
+44 (0)20 7390 0237 |
About
To date,
Through our subscription based platform,
Chief Executive Officer's review
Overview
We are pleased to report that in the first half of 2020
In the six months ended
With COVID-19 severely impacting the macroeconomic environment and driving an increased requirement for workforces to shift to home working, heightened concerns relating to digital security and privacy have resulted in
In
As we continue to strengthen and expand the Group's privacy and security product ecosystem alongside growing our customer base, we believe
Operational review
Key Performance Indicators
|
30 June 2020 '000 |
31 Dec 2019 '000 |
Subscribers (thousands) |
2,380 |
2,308 |
Retention rate |
80% |
81% |
Deferred income ($'000) |
36,909 |
35,312 |
|
|
|
|
Six months ended (unaudited)
|
Six months ended (unaudited)
|
Adjusted EBITDA |
16,422 |
5,756 |
Adjusted operating cash flow3: |
|
|
Attributable to current year ($'000) |
19,232 |
7,297 |
Investment in growth |
(10,478) |
(7,094) |
Adjusted operating cash flow ($'000) |
8,754 |
203 |
The Group's total number of subscribers increased to 2,380,000 as at
The number of CyberGhost and Intego subscribers increased 20% and 22% respectively on an annualised basis during the period and we expect PIA to achieve these double digit growth rates, as all solutions continue to benefit from
The PC performance products saw a 2.4% annualised decrease in users during the period, as we continue to shift our customer acquisition focus to the high growth privacy and security verticals.
Overall, the Group's retention rate remained very high at 80% (
Integration and cross-promotion
The integration of PIA has progressed extremely well and more rapidly than originally anticipated, with the associated cost synergies now expected at the upper end of the
As outlined at the Company's capital markets event in June, the key elements of the integration have comprised user acquisition and marketing, customer service, infrastructure, R&D and culture, with significant benefits realised as the integration advances.
In terms of infrastructure, we have implemented new technology protocols whilst reducing expenditure. We expect to achieve an impressive 40%2 reduction in PIA's monthly operating costs in Q3 2020, mainly derived from achieving economies of scale with vendors and high-level synergies. We have enhanced our combined customer support function providing a better-quality service to our customers across the board while reducing costs. We have reduced wait times, achieving an 800% increase in chat support and adding 24/7 service, whilst achieving a 45% reduction in costs.
Culturally, the acquisition has exceeded our expectations.
The combination of the
As a result of cross promotion initiatives, we have seen a 15% take-up rate of
Product development
The first half of the year has been one of most significant in
Our product development efforts have been focused on two main strategic objectives: expanding our privacy and security ecosystem offering; and providing superior infrastructure to our customers.
Substantial progress has been made in the expansion of our software suite.
On the infrastructure front, we deployed a new 'industry-first' encrypted WireGuard protocol across the Digital Privacy division - providing a state-of-the-art cryptography to our users. In addition, we begun to co-locate a
At
Outlook
Whilst we continue to monitor the ongoing COVID-19 pandemic and the wider macro-economic situation closely,
Our focus in the near-term remains on generating organic growth through a number of priorities, including completing the integration of PIA, further augmenting the Group's Digital Privacy suite, leveraging
The board remains confident in the Group achieving revenues of between
Chief Executive Officer
1Source: Global Market Insight -
2 PC performance users comprise of 15.8% of
Chief Financial Officer's review
Overview
Revenues in the first half of 2020 increased by 97% to
Adjusted cash flow from operations attributable to the current financial period was
On
The applicable Margin is linked to the Adjusted Leverage, tested at the end of each quarter. In the instance that the Adjusted Leverage is greater than 2 or less than 1 the applicable margin will change to 2.25% or 1.85% respectively. The effective interest rate after considering debt issuance costs is 4.1%. The Company's balance sheet remains strong with a cash balance of
Segment Result
|
|
Revenue |
|
Segment result |
||||
|
|
H1 2020 |
|
H1 2019 |
|
H1 2020 |
|
H1 2019 |
|
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
Digital Privacy |
|
42,237 |
|
12,228 |
|
24,560 |
|
6,521 |
Digital Security |
|
16,749 |
|
17,705 |
|
7,041 |
|
8,178 |
Revenue |
|
58,986 |
|
29,933 |
|
31,601 |
|
14,699 |
The segment result has been calculated using revenue less costs directly attributable to that segment. Cost of sales comprises payment processing fees and infrastructure costs for the Group's privacy products. Direct sales and marketing costs are user acquisition costs.
Digital Privacy |
|
|
|
|
|
|
|
|
H1 2020 |
|
H1 2019 |
|
|
|
$'000 |
|
$'000 |
Revenue |
|
|
42,237 |
|
12,228 |
Cost of sales |
|
|
(7,526) |
|
(2,338) |
Direct sales and marketing costs |
|
|
(10,151) |
|
(3,369) |
Segment result |
|
|
24,560 |
|
6,521 |
Segment margin (%) |
|
|
58.1 |
|
53.3 |
During the period, the Digital Privacy segment has seen continued growth with a 245% increase in revenue to
Digital Security |
|
|
|
|
|
|
|
|
H1 2020 |
|
H1 2019 |
|
|
|
$'000 |
|
$'000 |
Revenue |
|
|
16,749 |
|
17,705 |
Cost of sales |
|
|
(1,087) |
|
(1,825) |
Direct sales and marketing costs |
|
|
(8,621) |
|
(7,702) |
Segment result |
|
|
7,041 |
|
8,178 |
Segment margin (%) |
|
|
42.0 |
|
46.2 |
During the period, revenue from the Digital Security segment slightly decreased, by 5% to
Adjusted EBITDA from continued operations
Adjusted EBITDA for the six months to
|
|
|
|
|
|
|
|
|
H1 2020 |
|
H1 2019 |
|
|
|
$'000 |
|
$'000 |
Revenue |
|
|
58,986 |
|
29,933 |
Cost of sales |
|
|
(8,613) |
|
(4,163) |
Direct sales and marketing costs |
|
|
(18,772) |
|
(11,071) |
Segment result |
|
|
31,601 |
|
14,699 |
|
|
|
|
|
|
Indirect sales and marketing costs |
|
|
(4,644) |
|
(3,687) |
Research and development costs |
|
|
(2,963) |
|
(1,384) |
Management, general and administrative cost |
|
|
(7,572) |
|
(3,872) |
Adjusted EBITDA |
|
|
16,422 |
|
5,756 |
EBITDA margin % |
|
|
27.8 |
|
19.2 |
The increase in adjusted operating expenses is mainly due to a
Operating profit
A reconciliation of Adjusted EBITDA to operating profit is provided as follows:
|
|
|
|
|
|
|
|
|
H1 2020 |
|
H1 2019 |
|
|
|
$'000 |
|
$'000 |
Adjusted EBITDA |
|
|
16,422 |
|
5,756 |
Employee share-based payment charge |
|
|
(542) |
|
(989) |
Exceptional and non-recurring costs |
|
|
(2,683) |
|
(519) |
Depreciation and amortisation |
|
|
(9,790) |
|
(2,840) |
Operating profit |
|
|
3,407 |
|
1,408 |
Exceptional and non-recurring costs in H1 2020 comprised non-recurring staff costs of
Profit before tax
Profit before tax was
Profit after tax
Profit after tax was
Cash flow
|
|
|
|
|
|
|
|
|
H1 2020 |
|
H1 2019 |
|
|
|
$'000 |
|
$'000 |
Cash flow/(outflow) from operations |
|
|
5,890 |
|
(350) |
Exceptional and non-recurring cash outflow |
|
|
2,864 |
|
553 |
Adjusted cash flow from operations |
|
|
8,754 |
|
203 |
% of Adjusted EBITDA |
|
|
53% |
|
4% |
Excluding increase of deferred contract costs |
|
|
10,478 |
|
7,094 |
Adjusted Cash flow from operations attributable to the current year |
|
|
19,232 |
|
7,297 |
% of Adjusted EBITDA |
|
|
117% |
|
127% |
Cash flow from operations was
Net tax payments in the period were
Cash spent in the period on capital expenditure of
Cash flow from financing activities of
Financial position
At
Chief Financial Officer
Consolidated statement of comprehensive income
For the six months ended
|
|
|
Six months ended (unaudited) |
|
Six months ended (unaudited) |
|
Note |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Revenue |
3 |
|
58,986 |
|
29,933 |
Cost of sales |
|
|
(8,613) |
|
(4,163) |
Gross profit |
|
|
50,373 |
|
25,770 |
|
|
|
|
|
|
Selling and marketing costs |
|
|
(23,457) |
|
(14,827) |
Research and development costs |
|
|
(3,054) |
|
(1,547) |
Management, general and administrative costs |
|
|
(10,665) |
|
(5,148) |
Depreciation and amortisation |
|
|
(9,790) |
|
(2,840) |
Total operating costs |
5 |
|
(46,966) |
|
(24,362) |
|
|
|
|
|
|
Operating profit |
5 |
|
3,407 |
|
1,408 |
|
|
|
|
|
|
Adjusted EBITDA |
5 |
|
16,422 |
|
5,756 |
|
|
|
|
|
|
Employee share-based payment charge |
|
|
(542) |
|
(989) |
Exceptional and non-recurring costs |
5 |
|
(2,683) |
|
(519) |
Depreciation and amortisation |
|
|
(9,790) |
|
(2,840) |
Operating profit |
5 |
|
3,407 |
|
1,408 |
|
|
|
|
|
|
Finance income |
|
|
- |
|
317 |
Finance costs |
|
|
(2,031) |
|
(420) |
Profit before taxation |
|
|
1,376 |
|
1,305 |
Tax charge |
|
|
(1,167) |
|
(369) |
Profit for the period |
|
|
209 |
|
936 |
Other comprehensive income: |
|
|
|
|
|
Items that may be reclassified to profit and loss: |
|
|
|
|
|
Foreign exchange differences on translation of foreign operations |
|
|
8 |
|
6 |
Total comprehensive profit for the period |
|
|
217 |
|
942 |
Earnings per share attributable to the ordinary equity holders of the company:
|
|
|
|
|
|
Basic earnings per share (cents) |
7 |
|
0.13 |
|
0.7 |
Diluted earnings per share (cents) |
7 |
|
0.11 |
|
0.6 |
*Adjusted EBITDA is a non GAAP measure and a company specific measure which is earnings before interest, tax, depreciation, amortisation, share based payment charges and exceptional and non-recurring costs.
Consolidated statement of financial position
As at
|
|
|
30 June 2020 (unaudited) |
|
31 December 2019 (audited) |
|
Note |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets |
|
|
234,578 |
|
242,100 |
Property, plant and equipment |
|
|
2,289 |
|
2,351 |
Right-of-use assets |
|
|
2,485 |
|
2,985 |
Deferred consideration |
|
|
446 |
|
446 |
Deferred contract costs |
|
|
20,857 |
|
16,542 |
Deferred tax asset |
|
|
2,125 |
|
2,180 |
|
|
|
262,780 |
|
266,604 |
Current assets |
|
|
|
|
|
Software license inventory |
|
|
80 |
|
96 |
Deferred contract costs |
|
|
18,961 |
|
12,798 |
Deferred consideration |
|
|
346 |
|
346 |
Trade and other receivables |
|
|
7,692 |
|
6,687 |
Cash and cash equivalents |
|
|
17,012 |
|
8,211 |
|
|
|
44,091 |
|
28,138 |
Total assets |
|
|
306,871 |
|
294,742 |
Equity |
|
|
|
|
|
Share capital |
6 |
|
16 |
|
16 |
Additional paid in capital |
|
|
154,573 |
|
153,002 |
Shares to be issued |
|
|
56,499 |
|
56,499 |
Foreign exchange differences on translation of foreign operations |
|
|
786 |
|
778 |
Retained earnings |
|
|
(54,540) |
|
(55,291) |
Equity attributable to equity holders of the parent |
|
|
157,334 |
|
155,004 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Contract liabilities |
|
|
5,501 |
|
6,013 |
Loans and Borrowings |
8 |
|
33,065 |
|
- |
Deferred tax liabilities |
|
|
23,189 |
|
22,102 |
Long term lease liabilities |
|
|
1,347 |
|
1,753 |
Deferred consideration |
|
|
14,922 |
|
14,578 |
|
|
|
78,024 |
|
44,446 |
Current liabilities |
|
|
|
|
|
Trade and other payables |
10 |
|
26,502 |
|
19,632 |
Loans and Borrowings |
8 |
|
7,371 |
|
- |
Shareholder loan |
8,9 |
|
- |
|
40,221 |
Contract liabilities |
|
|
31,408 |
|
29,299 |
Short term lease liabilities |
|
|
1,337 |
|
1,365 |
Deferred consideration |
|
|
4,895 |
|
4,775 |
|
|
|
71,513 |
|
95,292 |
Total equity and liabilities |
|
|
306,871 |
|
294,742 |
Consolidated statement of cash flows
For the six months ended
|
|
Six months ended (unaudited) |
|
Six months ended (unaudited) |
|
|
$'000 |
|
$'000 |
Cash flow from operating activities |
|
|
|
|
Profit for the period after taxation |
|
209 |
|
936 |
Adjustments for: |
|
|
|
|
Amortisation of intangible assets |
|
8,780 |
|
2,049 |
Profit on sale of intangible assets |
|
(27) |
|
- |
Amortisation of Right-to-use assets |
|
680 |
|
628 |
Depreciation of property, plant and equipment |
|
330 |
|
163 |
(Profit)/Loss on sale of property, plant and equipment |
|
(7) |
|
37 |
Tax charge |
|
1,167 |
|
369 |
Interest Income |
|
- |
|
(317) |
Interest expenses |
|
1,752 |
|
37 |
Share based payment charge |
|
542 |
|
989 |
Interest received |
|
- |
|
169 |
Unrealised foreign exchange differences |
|
(16) |
|
39 |
Operating cash flow before movement in working capital |
|
13,410 |
|
5,099 |
(Increase)/Decrease in trade and other receivables |
|
(1,265) |
|
321 |
Decrease/(Increase) in software licences inventory |
|
16 |
|
(60) |
Increase/(Decrease) in trade and other payables |
|
2,610 |
|
(33) |
Increase in deferred contract costs |
|
(10,478) |
|
(7,094) |
Increase in contract liabilities |
|
1,597 |
|
1,417 |
Cash flow/(outflow) from operations |
|
5,890 |
|
(350) |
Tax paid net of refunds |
|
(294) |
|
(839) |
Cash generated from/(used in) operations |
|
5,596 |
|
(1,189) |
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
Purchases of property, plant and equipment |
|
(193) |
|
(302) |
Sale of property, plant and equipment |
|
7 |
|
6 |
Sales of intangible assets |
|
130 |
|
- |
Intangible assets acquired |
|
(148) |
|
(1) |
Capitalisation of development costs |
|
(1,205) |
|
(1,084) |
Net cash used in investing activities |
|
(1,409) |
|
(1,381) |
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
Repurchase of share-based consideration |
|
- |
|
(880) |
Payment of leases |
|
(693) |
|
(591) |
Proceeds from loan |
|
40,000 |
|
- |
Proceeds from RCF |
|
1,654 |
|
- |
Debt issuance costs |
|
(873) |
|
- |
Repayment of interest on Shareholder loan |
|
(1,155) |
|
- |
Repayment of Shareholder loan |
|
(40,000) |
|
- |
Exercise of options by employees |
|
5,904 |
|
74 |
Net cash generated from/(used in) financing activities |
|
4,837 |
|
(1,397) |
Net increase/(decrease) in cash and cash equivalents |
|
9,024 |
|
(3,967) |
|
|
|
|
|
Revaluation of cash due to changes in foreign exchange rates |
|
(223) |
|
(5) |
Cash and cash equivalents at beginning of year |
|
8,211 |
|
40,405 |
Cash and cash equivalents at end of year |
|
17,012 |
|
36,433 |
Notes
1. General information
The financial information set out in this document is for
The Board of Directors approved this interim financial information on
2. Basis of preparation
This interim consolidated financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and interpretations (collectively IFRS) issued by the
The annual financial statements of
The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2019 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after)
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2020:
• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)
• IFRS 3 Business Combinations (Amendment - Definition of Business)
• Revised Conceptual Framework for Financial Reporting
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify that 'settlement' includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity
instrument separately from the liability component of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after 1 January 2022.
The Group is currently assessing the impact of these new accounting standards and amendments. The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group.
After making enquiries, the directors have concluded that the Group has adequate resources to continue operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated unaudited financial statements.
3. Disaggregation of revenue
|
|
Six months ended 30 June 2020 |
|
Six months ended 30 June 2019 |
|
|
(unaudited) |
|
(unaudited) |
|
|
$'000 |
|
$'000 |
Sale of Digital Security, endpoint protection, and PC performance products |
|
16,749 |
|
17,705 |
Sale of Digital Privacy software solutions |
|
42,237 |
|
12,228 |
|
|
58,986 |
|
29,933 |
The following table presents our revenues disaggregated by the timing of revenue recognition in accordance with our reporting segments:
|
Six months ended 30 June 2020 (unaudited) (USD, in thousands) |
Six months ended 30 June 2019 (unaudited) (USD, in thousands)
|
||||
|
Digital Security |
Digital Privacy |
Total |
Digital Security |
Digital Privacy
|
Total |
Revenue recognised over a period |
2,158 |
35,884 |
38,042 |
2,196 |
7,862 |
10,058 |
Revenue recognised at a point in time |
14,591 |
6,353 |
20,944 |
15,509 |
4,366 |
19,875 |
Total |
16,749 |
42,237 |
58,986 |
17,705 |
12,228 |
29,933 |
4. Segmental information
Segment revenues and results
Based on the management reporting system, the Group operates two reportable segments:
· Digital Security - comprising software and SaaS products offering security, endpoint protection and PC performance.
· Digital Privacy - comprising virtual private network ("VPN") solutions and other privacy SaaS products.
Six months ended 30 June 2020 |
|
Digital Security |
|
|
Digital Privacy |
|
Total |
|
|
$'000 |
|
|
$'000 |
|
$'000 |
Revenue |
|
16,749 |
|
|
42,237 |
|
58,986 |
Cost of sales |
|
(1,087) |
|
|
(7,526) |
|
(8,613) |
Direct sales and marketing costs |
|
(8,621) |
|
|
(10,151) |
|
(18,772) |
Segment result |
|
7,041 |
|
|
24,560 |
|
31,601 |
Central operating costs |
|
|
|
|
|
|
(15,179) |
Adjusted EBITDA (note 5) |
|
|
|
|
|
|
16,422 |
Depreciation and amortisation |
|
|
|
|
|
|
(9,790) |
Employee share-based payment charge |
|
|
|
|
|
|
(542) |
Exceptional or non-recurring costs |
|
|
|
|
|
|
(2,683) |
Operating profit |
|
|
|
|
|
|
3,407 |
Finance income |
|
|
|
|
|
|
- |
Finance costs |
|
|
|
|
|
|
(2,031) |
Profit before tax |
|
|
|
|
|
|
1,376 |
Taxation |
|
|
|
|
|
|
(1,167) |
Profit from the period |
|
|
|
|
|
|
209 |
Six months ended 30 June 2019 |
|
|
|
|
|
|
|
|
|
Digital Security |
|
|
Digital Privacy |
|
Total |
|
|
$'000 |
|
|
$'000 |
|
$'000 |
|
|
|
|
|
|
|
|
Revenue |
|
17,705 |
|
|
12,228 |
|
29,933 |
Cost of sales |
|
(1,825) |
|
|
(2,338) |
|
(4,163) |
Direct sales and marketing costs |
|
(7,702) |
|
|
(3,369) |
|
(11,071) |
Segment result |
|
8,178 |
|
|
6,521 |
|
14,699 |
Central operating costs |
|
|
|
|
|
|
(8,943) |
Adjusted EBITDA (note 5) |
|
|
|
|
|
|
5,756 |
Depreciation and amortisation |
|
|
|
|
|
|
(2,840) |
Employee share-based payment charge |
|
|
|
|
|
|
(989) |
Exceptional or non-recurring costs |
|
|
|
|
|
|
(519) |
Operating profit |
|
|
|
|
|
|
1,408 |
Finance income |
|
|
|
|
|
|
317 |
Finance costs |
|
|
|
|
|
|
(420) |
Profit before tax |
|
|
|
|
|
|
1,305 |
Taxation |
|
|
|
|
|
|
(369) |
Profit from the period |
|
|
|
|
|
|
936 |
5. Operating Profit
Adjusted EBITDA
Adjusted EBITDA is calculated as follows:
|
|
|
Six months ended 30 June 2020 |
|
Six months ended 30 June 2019 |
|
|
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Operating profit |
|
|
3,407 |
|
1,408 |
Depreciation and amortisation |
|
|
9,790 |
|
2,840 |
Employee share-based payment charge |
|
|
542 |
|
989 |
Exceptional and non-recurring costs: |
|
|
|
|
|
Non-recurring staff and restructuring costs |
|
|
2,465 |
|
401 |
Exceptional professional services costs |
|
|
218 |
|
118 |
Adjusted EBITDA |
|
|
16,422 |
|
5,756 |
Operating costs
Operating costs are further analysed as follows:
|
Six months ended 30 June 2020 Adjusted $'000 |
Six months ended 30 June 2020 Total $'000 |
|
Six months ended 30 June 2019 Adjusted $'000 |
Six months ended 30 June 2019 Total $'000 |
|
|
|
|
|
|
Direct sales and marketing costs |
18,772 |
18,772 |
|
11,071 |
11,071 |
Indirect sales and marketing costs |
4,644 |
4,685 |
|
3,687 |
3,756 |
Selling and marketing costs |
23,416 |
23,457 |
|
14,758 |
14,827 |
Research and development costs |
2,963 |
3,054 |
|
1,384 |
1,547 |
Management, general and administrative cost |
7,572 |
10,665 |
|
3,872 |
5,148 |
Depreciation and amortisation |
2,155 |
9,790 |
|
1,281 |
2,840 |
Total operating costs |
36,106 |
46,966 |
|
21,295 |
24,362 |
Adjusted operating costs exclude share-based payment charges and employer costs related to employee exercises, exceptional bonuses for the acquisition and integration of PIA, professional services related to business combinations, and amortisation of acquired intangible assets.
6. Shareholder's equity
Ordinary share capital as at 30 June 2020 amounted to $16,014 (30 June 2019: $14,850; 31 December 2019: $16,014).
The number of shares in issue as at 30 June 2020 was 160,144,132 (30 June 2019: 148,496,073; 31 December 2019: 160,144,132).
As of 30 June 2020, the Company held in treasury a total of 436,884 ordinary shares of $0.0001 (30 June 2019: 4,390,442; 31 December 2019: 3,865,223). During the six months ended 30 June 2020, 3,428,339 ordinary shares of $0.0001 were transferred out of treasury to satisfy the exercise of options by the Company employees (30 June 2019: 85,111).
The Kape Technologic plc Employee Benefit Trust holds 1,200,000 Ordinary Shares (30 June 2019: 1,800,000; 31 December 2019: 1,800,000), the voting rights to which have been waived.
7. Earnings per share
Basic profit per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
|
|
|
Six months ended 30 June 2020 |
|
Six months ended 30 June 2019 |
|
|
|
cents |
|
cents |
|
|
|
|
|
|
Basic earnings per share |
|
|
0.13 |
|
0.7 |
Diluted earnings per share |
|
|
0.11 |
|
0.6 |
|
|
|
|
|
|
Adjusted basic |
|
|
6.3 |
|
2.6 |
Adjusted diluted |
|
|
5.3 |
|
2.5 |
Adjusted earnings per share is a non-GAAP measure and therefore the approach may differ between companies. Adjusted earnings have been calculated as follows:
|
|
|
Six months ended 30 June 2020 |
|
Six months ended 30 June 2019 |
|
|
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Profit/(Loss) for the period |
|
|
209 |
|
936 |
|
|
|
|
|
|
Post tax adjustments: |
|
|
|
|
|
Employee share-based payment charge |
|
|
542 |
|
1,010 |
Exceptional and non-recurring costs |
|
|
2,213 |
|
416 |
Amortisation on acquired intangible assets |
|
|
6,785 |
|
1,244 |
Finance cost on deferred consideration and leases |
|
|
550 |
|
- |
Adjusted profit for the year |
|
|
10,299 |
|
3,606 |
|
|
|
Number |
|
Number |
Denominator - basic: |
|
|
|
|
|
Weighted average number of equity shares for the purpose of earnings per share |
|
|
163,228,289 |
|
142,285,061 |
|
|
|
|
|
|
Adjustments for calculation of diluted earnings per share: |
|
|
|
|
|
Impact of potentially dilutive shares related to employee options |
|
|
7,658,686 |
|
3,227,811 |
Impact of potentially dilutive shares related to deferred shares consideration for business |
|
|
23,146,630 |
|
- |
Impact of potentially dilutive shares related to deferred shares consideration for business |
|
|
194,033,605 |
|
145,512,872 |
|
|
|
|
|
|
The diluted denominator has not been used where this has anti-dilutive effect.
The difference between weighted average number of Ordinary shares used for basic earnings per share and the diluted earnings per share is 30,805,316 (H1 2019: 3,227,811) being the effect of all potentially dilutive Ordinary shares derived from the number of share options granted to employees and deferred share consideration relating to the acquisition of LTMI Holding ("PIA") that are to be held in escrow against future claims.
8. Loans and Borrowings
|
|
|
|
|
Shareholder loan |
|
|
|
|
|
$'000 |
|
$'000 |
|
|
|
|
|
|
|
|
|
|
At 31 December 2019 |
|
|
- |
|
40,221 |
|
|
Term Facility |
|
|
40,000 |
|
- |
|
|
Revolving credit facility |
|
|
1,654 |
|
- |
|
|
Debt issuance costs |
|
|
(1,486) |
|
- |
|
|
Interest expenses |
|
|
268 |
|
934 |
|
|
Interest paid |
|
|
- |
|
(1,155) |
|
|
Repayment of loan |
|
|
- |
|
(40,000) |
|
|
At 30 June 2020 |
|
|
40,436 |
|
- |
|
|
Shareholder loan
On 6 December 2019,
On 4 May 2020,
Bank loan
(a) General
On 28 April 2020,
The New Debt Facilities comprise a $40 million term facility (the "Term Facility"), a $10 million revolving credit facility (the "RCF"), and a $20 million uncommitted acquisition facility (the "Uncommitted Acquisition Facility"). The New Debt Facilities have a three-year term with an option to extend by up to an additional two years, 50% of the Term Facility will be repaid on a quarterly basis across 36 months starting from 30 September 2020.
Term Facility
The net proceeds of the Term Facility after deducting commissions and other direct costs of the Term Facility totalled $38.514 million. Commissions and other direct costs of the Term Facility have been offset against the principal balance and are amortised throughout the loan.
The Term Facility carries an interest rate of 3 months LIBOR (as of the beginning of the relevant period) plus an opening margin of 2% per annum.
The applicable Margin is linked to the Adjusted Leverage, tested at the end of each quarter for the preceding 12 months (first test will be a six-month test, second will be nine months and then 12 months at each quarterly test date thereafter). In case the Adjusted Leverage will be greater than 2 or less than 1 the applicable margin will change to 2.25% or 1.85% respectively. The effective interest rate after considering debt issuance cost is 4.1%.
RCF
A $10 million revolving credit facility, that carries a commitment fee for the unused facility of 35% of the applicable margin and interest rate as of the Term Facility. As of the reporting date the credit facility drawn amount is $1.65 million.
Uncommitted Acquisition Facility
Up to $20 million to be used for Acquisitions, including the funding of deferred consideration due under the acquisition agreement of Private Internet Access. The interest rate will be 3 months LIBOR plus a margin of no more than 1% above the original Margin applicable to the Term Loan or Revolving Credit Facility.
(b) Security
The New Debt Facilities is secured by first ranking security over all assets (including material Intellectual Property) of
(c) Loan Covenants
The Group is required to comply with the following financial covenants:
· The ratio of EBITDA to Net Finance Charges ("Interest Cover") shall not be less than 4.0x in respect of any Relevant Period.
· The ratio of Total Net Debt on the last day of the relevant period to Adjusted EBITDA in respect of that Relevant period ("Adjusted Leverage"), shall not exceed 2.5x for the first 4 relevant periods and 2.0x thereafter.
As of 30 June 2020, the Group has met the financial covenants as follows:
· Interest Cover: 27
· Adjusted Leverage: 0.71
30 June 2020 |
Carrying amount |
Contractual cash flow |
3 months or less |
Between 3-12 months |
Between 1-5 years |
More than 5 years |
|
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
|
|
|
|
|
|
|
|
40,436 |
44,005 |
2,291 |
6,239 |
35,475 |
- |
9. Related party transactions
The Group is controlled by Unikmind Holdings Limited, registered in
On 4 May 2020, the Company fully repaid the shareholder loan and accumulated interest following the closing of a bank debt facility, see Note 8.
During the period the following transactions were carried out with related parties:
|
Six months ended 30 June 2020 |
|
Six months ended 30 June 2019 |
|
$'000 |
|
$'000 |
|
|
|
|
Technical support services to end customers and administration services provided by common controlled companies |
(120) |
|
(128) |
Office expenses to common controlled companies |
(89) |
|
(37) |
Development services provided by common controlled company |
- |
|
(30) |
Payment processing services provided by common controlled company |
- |
|
(170) |
Amortisation of right-of-use assets with common controlled companies related to office leases |
(496) |
|
(414) |
Interest expenses from lease liabilities to common controlled companies related to office leases |
(64) |
|
(35) |
Interest expenses from shareholder short-term loan and debt facility (Note 8) |
(934) |
|
- |
|
(1,703) |
|
(814) |
10. Government Grants
On 30 April 2020, Private Internet Access Inc received $0.7 million from the
As of 30 June 2020, the Group believes the PPP amount will be fully forgiven and accounted as a Government grant. The PPP is included in Trade and other payables as deferred income and recognised in profit and loss over the period necessary to match them with the costs that they are intended to compensate.
11. Cautionary statement
This document contains certain forward-looking statements relating to
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