Crimsonwing plc - Full-Year Results

Thursday, July 25th, 2013

On 25 July, Crimsonwing plc published its Annual Report covering the financial year ended 31 March 2013.

Performance Overview

During the financial year ended 31 March 2013, the Crimsonwing Group generated a record revenue figure of €17.8 million, representing a 17.3% increase over the previous year’s comparable figure solely on the back of organic growth. Given the increased business activity, direct costs also grew by 18.3% to €11.3 million. Nonetheless, the Group’s gross profit grew by 15.5% to €6.5 million whilst the gross profit margin slipped marginally lower to 36.4% from 37% in the previous financial year.

Administrative expenses dropped by 8.9% to €4.8 million mainly due to the cost savings achieved from the restructuring at the BV and VDA business units in the Netherlands. As a result, the Crimsonwing Group reported a substantial improvement in earnings before interest, tax, depreciation and amortisation (EBITDA) to a record €1.6 million compared to €0.3 million in the previous financial year. Consequently, the EBITDA margin improved from 2.3% to 9.3%.

It is noteworthy to highlight that all the business units of the Group registered an improvement in the respective EBITDA levels.

• Crimsonwing UK – This business unit registered a 70% increase in sales related to the ERP (Dynamics) business coupled with some larger projects as well as the growing level of annuity revenues. Furthermore, this unit in the UK was also involved in the building of an international eCommerce global trading platform for a FTSE100 (the UK’s leading equity index) client. The build phase was completed in February 2013 and will be gradually rolled out globally from 2013. EBITDA increase substantially to €0.36 million compared to €0.14 million in the previous financial year.

Crimsonwing NL (BV & VDA) – This unit delivered overhead reductions following a restructuring exercise. In the meantime, sales were largely maintained given the unit’s strong annuity revenues on the Group’s intellectual property. EBITDA turned positive amounting to €0.09 million compared to a negative figure of €0.65 million in the previous financial year. Looking ahead, this business unit is expected to make a strong contribution during the current financial year ending 31 March 2014.

• Crimsonwing NL (Promentum) – This unit was awarded and started delivery on a number of contracts with several major clients which in turn resulted in an acceleration of the consultancy headcount. EBITDA improved from €0.34 million during the financial year ended 31 March 2012 to €0.53 million during the period under review. The Annual Report also notes that during the current financial year ending 31 March 2014 the three units (BV, VDA & Promentum) in the Netherlands will be merged into one legal entity.

• Crimsonwing Malta – As sales increased, this unit undertook a significant investment in its staff to become one of the largest accredited Magento (eCommerce) partners in Europe and to reduce its attrition rates amongst employees. This unit has also strengthened support services by investing in new technology and introducing a 7 by 24 hour service for clients requesting this enhanced service.

After accounting for a depreciation and amortisation charge of €0.55 million (FY 2012: €0.46 million), the Group’s operating profit amounted to just below €1.1 million compared to the operating loss of €0.1 million incurred in the previous financial year.

The Group incurred €0.1 million in net finance costs representing an 18.6% increase over the previous financial year.

Overall, the Crimsonwing Group plc reported a record pre-tax profit of €0.98 million compared to the pre-tax loss of €0.2 million incurred in the previous financial year. After accounting for a tax charge of €0.1 million and minority interests of €0.07 million (representing the 49% shareholding in Promentum owned by third parties for the period 1 March to 31 October 2012 before Crimsonwing plc acquired the remaining shareholding), the net profit attributable to shareholders amounted to €0.77 million compared to the net loss of €0.53 million in the previous financial year.

The balance sheet as at 31 March 2013 show total assets at €8.4 million whilst total liabilities dropped by 10.2% to just under €5 million mainly reflecting the reduction in payables and bank borrowings. Given the profit registered during the period under review and the new equity created in lieu of the 49% shareholding in Promentum (acquired by Crimsonwing plc on 1 November 2013), equity attributable to shareholders increased by 37.4% to €3.4 million.

Dividend 

The Directors recommended the payment of a final gross dividend of €0.01 per share subject to shareholders’ approval at the forthcoming Annual General Meeting scheduled for 16 October 2013. The Directors also recommended that shareholders will be given the option to take up the dividend in the form of either cash or new shares. The cut-off date will be announced at a later date.

Outlook

The Directors believe that the Group is well on track to achieving the €20 million revenue mark during the current financial year ending 31 March 2014. The Directors explained that this is an important benchmark in the IT industry enabling the Group to take on larger and longer running projects and services.

Shareholder value will be improved and sustained through the following three initiatives:

i)    Reach the €20 million revenue mark with increased net margins on the back of very high demand for the Group’s solutions and services. The Group is also expected to increase its technical headcount, especially in Malta, without materially increasing fixed overheads.

ii)   Increase focus on the marketing of the Group’s own intellectual property which will be grouped under a new Independent Software Vendor (ISV) structure in Malta.

iii)  A new sales proposition, named Yourteam, which builds specialised and highly qualified capability for clients who wish to have greater control and direct involvement with the Malta solution centre. The Directors explained that this proposition will build longer term contracts and recurring revenue streams.

The announcement also provided an update on the Group’s performance for Q1 (April to June) of the current financial year. Like-for-like first quarter revenues grew by 16% to €5.02 million and like-for-like first quarter EBITDA jumped by 44% to €570,000 (2012: €395,000). The Directors also stated that the trading outlook for Q2 (July to September) remains positive.

Download

Crimsonwing plc – Annual Report for the financial year ended 31 March 2013

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