On 24 July, Crimsonwing plc issued its financial statements for the year ended 31 March 2012. During this period, the Crimsonwing Group registered a 5.9% increase in revenue to a record €15.2 million despite the tough market conditions faced by the Group. Moreover, the Directors explained that since most of the Group’s clients have an international dimension and its partner vendors are consolidating their marketing efforts with only the larger partners, the Group remains committed to reach the €20 million annual sales level through continued organic growth.
Nonetheless, the Crimsonwing Group reported earnings before interest, tax, depreciation and amortisation (EBITDA) of €347,093 down from €746,596 in the previous financial year and a net loss attributable to shareholders of €533,059 for the financial year ended 31 March 2012 compared to the net loss of €109,135 incurred in the previous financial year. The Directors explained that the worsening profitability was mainly due to some exceptional items amounting to €266,480 (described below) as well as the restructuring undertaken in the VDA business in The Netherlands (further details are also explained below).
Crimsonwing Ltd (UK)
Revenues from this business sector were relatively unchanged at €7.3 million which the Directors described as a good performance given the challenging conditions of the UK economy. However, EBITDA dropped by 12.3% to €144,176 following a number of investments made with respect to e-Commerce and Dynamics practices which included the recruitment of new consultants. Moreover, the UK subsidiary incurred costs related to the sales and initial project work on a major global roll-out e-Commerce project with a client forming part of the FTSE 100 index. Also worth noting is the announcement that the UK subsidiary also won a major international Dynamics project to support a European operation and also signed up several significant UK clients.
The Directors also explained that during the current financial year ending 31 March 2013 the overheads within this business sector are expected to drop following the retirement of Derek Linney who occupied the post of Solutions Director and this post will not be filled following a reorganisation across individual business units.
Crimsonwing (Malta) Ltd
The Malta subsidiary reported a 3.8% rise in revenue to €6.35 million as the €540,000 lost income in supporting the UK business was more than offset by the significant increase in direct sales (mainly to the Malta local market) which surged to just under €1.5 million from €810,296 in the previous financial year. However, EBITDA dropped by 39.3% to €510,590 reflecting a bad debt provision of €71,865 as well as significant non-chargeable activities including costs related to international tendering and initial project work-related expenses. Moreover, in the case of the Maltese business unit, the Directors noted high employee turnover during the year under review due to aggressive competition from the i-gaming industry.
Crimsonwing NL (Crimsonwing BV and VDA BV)
The financial year under review was again a difficult year for this business unit given some additional negative adjustments related to its restructuring and rightsizing resulting in a negative EBITDA of €647,051. Back in May 2011, Crimsonwing initiated the process of rightsizing this business but failed to do it quickly enough thereby resulting in high overheads and too many staff costs against the available client contracts. This process was closed off in the final months of the financial year under review. Moreover, Crimsonwing NL managed to reduce its office lease costs. In total, Crimsonwing NL is expected to achieve €750,000 in annual cost savings from the current financial year ending 31 March 2013.
The Directors also noted that all VDA support and service contracts were renewed and this unit is now in very good shape to move forward.
Crimsonwing Promentum BV
This business unit had a mixed year with revenues rising 13.8% to €4.5 million but EBITDA was practically unchanged at €339,378 due to some challenges in implementing first client releases of new product solutions.
Crimsonwing had announced on 24 May (after the close of the financial year under review) that an agreement was reached to acquire the remaining 49% of Crimsonwing Promentum BV in exchange for 2,940,000 new shares in Crimsonwing plc to be issued at a price of €0.30 each and a €294,000 4-year loan for the balance. Following this acquisition, the business of Crimsonwing Promentum BV will be amalgamated with that of Crimsonwing NL. As such, Crimsonwing plc will now be reporting under three geographical segments, namely: UK, The Netherlands and Malta.
Looking ahead, the Directors expect profits to grow given that the business units are now in very good shape coupled with an excellent business pipeline. Moreover, the Crimsonwing Group plans to consolidate its Intellectual Property into an Independent Software Vendor in order to have dedicated resources which will build channels to market outside the Group’s current presence to bring the Group’s solutions to a wider market. At the same time, this move will help free the existing teams to service the project engagements.