TIDMCROS
RNS Number : 3418Z
Crossrider plc
14 March 2017
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014
14 March 2017
Crossrider plc
("Crossrider" or the "Company")
Final results for the year ended 31 December 2016
Crossrider (AIM: CROS), the online distribution and digital
product company, announces its final results for the year ended 31
December 2016.
Financial highlights
-- Revenue of $56.5 million (2015: $84.6 million). Decrease is
primarily due to the expected decline and decision to cease
investment in the web apps platform
-- Adjusted EBITDA(1) of $6.4 million (2015: $10.1 million)
-- Increase in adjusted cash from operations(1) to $7.9 million (2015: $6.9 million)
-- Cash conversion from Adjusted EBITDA of 123 per cent (2015: 69 per cent)
-- Increase in Media and App Distribution combined segment(2)
results to $14.7 million (2015: $12.9 million)
-- Increase in Media and App Distribution combined segment
margins to 28.3 per cent (2015: 22.4 per cent)
-- Strong balance sheet with $72.1 million cash (2015: $71.3 million) and no debt
Operational highlights
-- Strengthened the Board, with appointments of Ido Erlichman as
Chief Executive Officer and Moran Laufer as Chief Financial
Officer
-- Completed restructuring of the business:
- Delivered $2.0 million of annualised savings
- Established two core business segments: App Distribution and Media
-- Acquired DriverAgent, a leading device driver repair software
and service, which is now fully integrated into the Group
-- Investment in organic growth opportunities gaining traction:
- Grew and strengthened our digital App Distribution platform
- Expanded geographical footprint in the Media division into
South East Asia, Middle East & Africa
Post period end
The Company announced separately today the acquisition of
CyberGhost, a leading cyber security SaaS provider with a focus on
the provision of Virtual Private Network ("VPN") solutions.
CyberGhost's solution focuses on safeguarding personal information
when browsing the Internet through unsecured mobile hotspots. The
acquisition is for an initial consideration of EUR3.2 million, the
issue of EUR3.0 million options over ordinary shares exercisable at
nominal value and an EBITDA based earn-out payment capped at EUR3.0
million
Ido Erlichman, Chief Executive Officer of Crossrider,
commented:
"Having joined Crossrider in May, I'm delighted to report
significant progress across our business and that we are on track
in the execution of our strategic plan. We have refocused
Crossrider's core operating activities and are now well positioned
to grow a world-class digital distribution platform both
organically and through our stated acquisition ambitions.
"We have made a strong start to 2017 and are delighted to have
today announced the acquisition of CyberGhost, a leading cyber
security provider which is in line with our strategy to broaden our
service offering into additional verticals. Through continued
acquisitions, organic growth and the integration of CyberGhost, we
look forward to continuing to drive profitability and long term
growth for the Group."
(1) EBITDA, Adjusted EBITDA and Adjusted cash flow from
operations are non GAAP measures. Adjusted EBITDA and adjusted cash
flow from operations are company specific measures which exclude
certain expenses which are considered to be one off and
non-recurring in nature.
(2) The segment result has been calculated using revenue less
costs directly attributable to that segment
Enquiries
Crossrider plc via Vigo Communications
Ido Erlichman, Chief Executive
Officer
Moran Laufer, Chief Financial Officer
Shore Capital (Nominated Adviser
& Broker) +44 (0)20 3772
Bidhi Bhoma / Toby Gibbs 2496
Vigo Communications (Financial
Public Relations)
Jeremy Garcia / Fiona Henson /
Antonia Pollock +44 (0)20 7830
crossrider@vigocomms.com 9700
About Crossrider
Crossrider is an online distribution and digital product
company. The Company utilises its proprietary marketing technology
platforms to prospect, optimise and monetise mobile and web media,
to create a superb user experience. The Company offers improved
retention and re-engagement rates, greatly enhancing the value of
user activity. Crossrider provides its platforms to its customers
for use with their products as well as developing and expanding its
own product portfolio. Crossrider's vision is to provide and
develop best-in-class digital products for its users globally.
Chairman's statement
2016 has been a year of both change and progress for Crossrider.
In June, we commenced a major restructuring to streamline our
business and simplify our reporting structure going forward. The
Company's restructuring has resulted in achieving significant cost
reductions and enabled us to pursue a new strategic direction,
focussed on expanding our digital distribution platform.
Strengthening the board
In May of this year, Crossrider announced the appointment of Ido
Erlichman as CEO. Ido's appointment has been pivotal in reshaping
our business, as we transition from a pure adtech business to a
leading software and digital distribution platform.
Ido has in-depth understanding of the market in which we operate
and brings significant experience in the technology sector garnered
through roles in private equity, consulting and finance and past
experience in his previous CEO role with turning around Visual
DNA.
Additionally, Crossrider has appointed Moran Laufer as CFO.
Moran has been a key member of the finance team since 2012 and
successfully supported the Group's admission to AIM.
In the short space of seven months, our management team has
already been able to implement significant strategic change and we
believe it is a very exciting time in the Company's
transformation.
New strategic direction
The strategic overhaul of Crossrider has resulted in stable
growth in our areas of focus - the App Distribution Division and
the Media Division. Since the beginning of 2016 we have been
winding down our operations in the web apps vertical and management
is now solely focused on our two core divisions.
Crossrider anticipated a decline in the web app sector due to
changes in the market environment. As a result, the Company shifted
its focus away from the web apps sector in the period, including
the browser extension platform, which has been outsourced through a
licensing agreement since January 2016. We expect the year to 31
December 2017 to be the last year of reporting for this
segment.
Foundation for growth
Crossrider continues to capitalise on opportunities consistent
with our strategic vision and is confident in the Company's ability
to accelerate the growth trajectory of its digital distribution
platform, particularly through acquisitions.
The Company's expansion in this sector started successfully with
the acquisition of DriverAgent in October. Crossrider has now
completed the integration of DriverAgent and anticipates its
contribution to revenue and earnings to materialise in the coming
year. Importantly, this acquisition has proven the efficacy of our
platform. The Board expects to deliver further growth in this
division through larger synergistic acquisitions in the coming
year.
We now feel we have a solid foundation in place from which we
can drive future growth and continue to strengthen and expand the
business.
The significant progress made by the Group in the course of the
year would not have been possible without the talented and
dedicated Crossrider team who continue to be key in executing on
our strategic plan.
Don Elgie
Non-executive Chairman
13 March 2017
Chief Executive Officer's review
2016 has been a transformational year for Crossrider, during
which the Company has successfully executed a three step strategic
plan to reposition the business as a leading software and digital
distribution platform.
Having restructured the business, the Board believes the Company
is now ideally placed to capitalise on opportunities to grow
organically through investment in our in-house capabilities and
through selective acquisitions. The Group's reshaped operations are
focussed on combining our strong digital media capabilities with
our growing digital product platform, with a particular emphasis on
serving the cyber security arena.
In the course of the year, management's primary challenge was to
restructure and strengthen the Company's core operations and we are
pleased to report that we have been able to achieve $2.0m in
annualised savings as a result of this process and, in addition,
establish two core business divisions - App Distribution and
Media.
Secondly, management was focused on achieving organic growth in
these core divisions and we are delighted that our App Distribution
segment has achieved 20% growth in the period while our Media
division has remained stable.
The third component of our strategy was to lay the foundations
for future expansion through bolt-on and strategic acquisitions,
building on our existing and refined business model. We have
successfully executed on this, announcing in October the highly
synergistic acquisition of DriverAgent, a leading device driver
search and update service, and we continue to actively assess
acquisition opportunities in 2017.
We have also taken further steps to strengthen our cash
generative activities, improving working capital discipline whilst
still providing quality service to all of our customers and
partners, which has resulted in an increase in the cash generated
from operations.
All of the initiatives that have been implemented are in support
of our strategic decision to expand our existing digital
distribution platform and extend our product offering, particularly
in the cyber security space.
App Distribution
App distribution product hub, generating revenues from end users
purchasing digital products online
In the app distribution division we are now offering two main
products, Reimage computer repair software and service and the
DriverAgent driver repair software and service. We have 720,000
paying subscribers around the world. Our top three markets are the
US, UK & Germany.
In the last year we have strengthened our platform so it now
provides an unrivalled and enhanced customer experience and
lifetime value, further improving our customer service metrics. We
believe that this provides us with a competitive advantage in the
marketplace and a strong foundation from which to expand both our
product offering and geographic reach.
In addition, we now have better control over our distribution,
as we have initiated the process of bringing customer service in
house, which allows us to improve the quality of our processes. We
have also bolstered our in-house media buying capabilities enabling
us to diversify our media sources, resulting in increased traffic
volume, quality and market share. We expect these changes to extend
customer lifetime value, enable margin consolidation and improve
customer retention, thereby increasing profitability.
In October, we announced the acquisition of DriverAgent, which
is designed for use with desktop computers, tablets and mobile
devices, to identify out-dated drivers. This acquisition was highly
complementary to our existing App Distribution hub and is now fully
integrated into the Group.
The DriverAgent acquisition demonstrates our progress in
successfully expanding our portfolio through our digital product
hub and we continue to look to expand this vertical, predominantly
through acquisition and third-party strategic partnerships.
Media
Marketing technology platforms and ad agency activities,
generating revenue through agreements with media partners
In the Media division we work with companies primarily in Europe
and provide them with end-to-end media and advertising technologies
services. These include media buying and ad agency technologies and
services, ad-serving technologies as well as programmatic video
buying capabilities.
In our Media division we have expanded our foothold in the
evolving media and advertising space by leveraging our strong
mobile capabilities. We have successfully entered new markets and
broadened our current offering into the native, social and content
distribution channels.
We continue to develop our advertising technologies and
supporting tools to address the constantly evolving marketplace and
ensure we optimise our technologies for our media buying services.
This is all consistent with our Company-wide strategy to maintain
best in class online distribution funnels for our digital
products.
Current trading and outlook
This year we have made significant progress in the turnaround of
the business, reducing our cost base and realigning our strategic
priorities. We believe these significant changes have repositioned
the Company, enabling us to complete the turnaround and grow our
core divisions in the medium term. The full impact of the
turnaround and subsequent benefits will be realised in the coming
year.
In 2017, whilst we will continue to drive organic growth
opportunities, we will also focus on strategic acquisitions
designed to broaden our exposure to SaaS revenues, mainly in the
cyber security vertical. We are currently exploring the viability
of a number of companies, evaluating them along the following
criteria:
-- Sizable and growing user base
-- Recurring revenue sales model
-- Strong technological team
-- Ability to deliver strong synergies with both the Group's
media capabilities and digital distribution platform
We have made a strong start to 2017 and continue to drive
profitability and long term future growth for the Group.
Chief Financial Officer's review
Overview
Revenue in the year to 31 December 2016 decreased to $56.5
million (2015: $84.6 million) and Adjusted EBITDA to $6.4 million
(2015: $10.1 million). The decrease is attributable to the Board's
decision to cease investment in the web apps platform and outsource
its monetisation to a third party. Excluding the web apps segment,
revenue at $52.0 million is lower in comparison to $57.6 million in
2015. However, segment results have significantly increased, at
$14.7 million (2015: $12.9 million) and margins have also increased
at 28.3 per cent (2015: 22.4 per cent).
Crossrider remains a highly cash generative business, with an
increase of $1 million in cash generated from operations after
adjusting for one-off non-recurring items of $7.9 million (2015:
$6.9 million). This represents adjusted cash conversion of 123 per
cent compared to 69 per cent in 2015. The Group balance sheet
remains strong with cash of $72.1 million at 31 December 2016 (31
December 2015 $71.3 million) and no debt.
During the period, the Group went through a major restructuring,
resulting in changes to its management reporting system and now
operates three reportable segments:
-- App distribution - comprising the Group's desktop app distribution platform;
-- Media - comprising the Group's Marketing technology platforms
and ad network activities; and
-- Web apps and license - comprising revenue generated from
licensing the web apps monetisation platform and associated
technology.
Consequently, the previous period segmental results have been
restated. The results of these segments are set out below.
Segment Result
Revenue Segment result
Restated Restated
2016 2015 2016 2015
$'000 $'000 $'000 $'000
App distribution 38,241 37,229 11,267 9,414
Media 13,783 20,426 3,480 3,499
Web apps and
License 4,508 26,980 4,508 13,611
------ -------- ------ --------
Revenue 56,532 84,635 19,255 26,524
====== ======== ====== ========
The segment result has been calculated using revenue less costs
directly attributable to that segment. Cost of sales comprises
commissions paid to publishers and payment processing fees. Direct
sales and marketing costs comprise traffic acquisition costs.
App distribution
2016 2015
$'000 $'000
Revenue 38,241 37,229
Cost of sales (2,360) (1,854)
Direct sales and marketing
costs (24,614) (25,961)
-------- --------
Segment result 11,267 9,414
-------- --------
Segment margin (%) 29.5 25.3
During the period, App Distribution improved in margins
significantly, reaching 29.5 per cent compared to 25.3 per cent in
the comparable period, resulting in a $1.9 million increase in the
segment result. This represents a 20 per cent uplift. The margin
improvement is attributable to two main drivers: improved media
buying efficiency resulting in better traffic quality as well as
user targeting and secondly, an improvement in customer retention
and up selling to existing customers.
In October 2016, Crossrider completed the acquisition of Driver
Agent, a driver repair and update software product for a
consideration of $1.2m.
Media
2016 2015
$'000 $'000
Revenue 13,783 20,426
Direct sales and marketing
costs (10,303) (16,927)
-------- --------
Segment result 3,480 3,499
-------- --------
Segment margin % 25.25 17.13
In the Media division, revenues have decreased by 32.5 per cent
and segment results have remained stable compared to 2015. The
decrease in revenues is attributable to two low margin contracts
with high working capital requirements that were signed in the
fourth quarter of 2015 and terminated in 2016 to improve cash flow
and decrease risk. If these contracts were to be excluded the
segment results would have shown an increase of circa 11.9 per cent
from a base of $3.1 million in 2015. This increase is attributable
to an expansion in new territories and verticals, mainly mobile app
distribution.
Web apps and license 2016 2015
$'000 $'000
Revenue 4,508 26,980
Cost of sales - (5,534)
Direct sales and marketing
costs - (7,835)
----- -------
Segment result 4,508 13,611
----- -------
Segment margin % 100 50.45
At the beginning of 2016, the board decided to outsource the
monetisation of its web apps platform to a third party. In light of
this shift in this part of the Group's business model the Group
ceased its media acquisition in this segment. Revenue in the period
is comprised of consideration for license of the platform and its
associated technology. The year to 31 December 2017 is expected to
be the last year of reporting for this segment as the technology
license contracts are expiring on September 2017.
Adjusted EBITDA
Adjusted EBITDA for year to 31 December 2016 was $6.4 million
(2015: $10.1 million). Adjusted EBITDA is a non-GAAP company
specific measure which is considered to be a key performance
indicator for the Group's financial performance. It excludes share
based payment charges and expenses which are considered to be
one-off and non-recurring in nature and are excluded from the
following analysis
2016 2015
$'000 $'000
Revenue 56,532 84,635
Cost of sales (2,360) (7,388)
Direct sales and marketing costs (34,917) (50,723)
-------- --------
Segment result 19,255 26,524
-------- --------
Indirect sales and marketing costs (4,265) (3,016)
Research and development costs (1,299) (2,539)
Management, general and administrative
cost (7,278) (10,905)
-------- --------
Adjusted EBITDA 6,413 10,064
-------- --------
Operating loss
A reconciliation of Adjusted EBITDA to operating loss is
provided as follows:
2016 2015
$'000 $'000
Adjusted EBITDA 6,413 10,064
Employee share-based
payment charge (716) (3,407)
Exceptional and non-recurring
costs (862) (1,957)
Depreciation and amortisation (9,884) (9,370)
Impairment of intangible
assets (4,683) (9,132)
------- --------
Operating loss (9,732) (13,802)
------- --------
Exceptional and non-recurring costs in FY2016 comprised
non-recurring staff restructuring costs of $0.6 million and a $0.3
million one-time onerous contract written off in the period. The
decrease in the Employee share-based payment charge is due to
reversal of charges from previous periods for employees that left
the Company during the year.
Impairment of intangible assets
The intangible assets related to the acquisition of the Definiti
ad-network in 2014 are allocated to the Group's Media segment and
are considered to be separate cash generating unit ("CGU's") for
the purpose of assessing carrying values. Following regulatory
changes in the mobile subscription vertical in which Definiti
operates, management now forecasts modest growth in advertising
volumes from the Definiti ad-network over the coming years. The
carried value of the intangible assets of Definiti ad-network CGU
have therefore been re-assessed resulting in a goodwill impairment
of $4.7 million being recognised in the year (2015: $nil)
Loss before tax
Loss before tax was $10.0 million (2015: $14.7 million).
Loss after tax
Loss after tax was $10.7 million (2015: $17.6 million). The tax
charge derives mainly from Group subsidiaries residual profits. The
Group continues to recognise a deferred tax asset of $0.2m (2015:
$0.7m) in respect of tax losses accumulated in previous years.
Cash flow
2016 2015
$'000 $'000
Cash flow from operations 5,922 5,910
Exceptional and non-recurring
costs 1,951 995
Adjusted cash flow
from operations 7,873 6,905
----- -----
% of Adjusted EBITDA 123% 69%
----- -----
Cash flow from operations was strong at $7.9 million (2015: $5.9
million). Adjusted cash flows from operations after adding back
acquisition payments treated as remuneration and payments that are
one off in nature, was $7.9 million this represents an improvement
in cash conversion to 123 per cent of adjusted EBITDA from 69 per
cent in 2015.
Tax paid in the period was $0.9 million (2015: $1.8
million).
Cash spent in the period on capital expenditure of $0.8 million
(2015: $1.8 million) mainly comprises of capitalised development
costs and purchase of fixed assets. Cash payments in respect of
previous acquisitions totalled $1.4 million (2015: $1.4 million).
The Company paid $0.9 million (2015: $0.1 million) in respect of
the acquisition of the DriverAgent software business. As a result,
net cash outflow from investing activities was $3.0 million (2015:
$3.2 million).
The share buy-back programme, announced in November 2015, was
completed in January 2016, returning $1.0 million to shareholders
in 2016 (2015: $5.1 million).
Financial position
At 31 December 2016, the Group had cash of $72.1 million (31
December 2015: $71.3 million), had net assets of $80.5 million (31
December 2015: $ 91.5million) and is debt free. At 31 December 2016
trade receivables were $5.6 million (31 December 2015: $13.0
million) which represented 44 days outstanding, (31 December 2015:
52 days).
Directors' responsibility statement
We confirm to the best of our knowledge:
1. The Group financial statements, prepared in accordance with
IFRSs as adopted by the European Union give a true and fair view of
the assets, liabilities, financial position and profit of the Group
and Company; and
2. The business review, which is incorporated into the
Directors' Report, includes a fair review of the development and
performance of the business and the position of the Group and
Company, together with a description of the principal risks and
uncertainties they face.
The Directors of Crossrider plc are listed in the Group's Annual
Report and Accounts for the year ended 31 December 2016. A list of
current directors is maintained on Crossrider's website,
www.crossrider.com.
By order of the Board,
Ido Erlichman Moran Laufer
Chief Executive Officer Chief Financial Officer
13 March 2017 13 March 2017
Consolidated statement of comprehensive income
For the year ended 31 December 2016
2016 2015
Note $'000 $'000
Revenue 2 56,532 84,635
Cost of sales (2,360) (7,388)
-------- --------
Gross profit 54,172 77,247
Selling and marketing
costs (39,915) (54,146)
Research and development
costs (1,661) (3,500)
Management, general
and administrative
costs (7,761) (14,901)
Depreciation and amortisation (9,884) (9,370)
Impairment of intangible
assets 10 (4,683) (9,132)
-------- --------
Total operating costs (63,904) (91,049)
Operating loss 3 (9,732) (13,802)
Adjusted EBITDA 6,413 10,064
-------- --------
Employee share-based
payment charge 6 (716) (3,407)
Exceptional and non-recurring
costs 3 (862) (1,957)
Depreciation and amortisation (9,884) (9,370)
Impairment of intangible
assets 10 (4,683) (9,132)
-------- --------
Operating loss 3 (9,732) (13,802)
------------------------------ ---- -------- --------
Share of results of
equity accounted associates 47 (38)
Finance income 4 15
Finance costs (332) (870)
-------- --------
Loss before taxation (10,013) (14,695)
Exceptional tax charge 4 - (2,200)
Tax charge 4 (665) (702)
-------- --------
Loss for the year (10,678) (17,597)
Other comprehensive
income:
Foreign exchange differences
on translation of foreign
operations - 1
-------- --------
Total comprehensive
income for the year (10,678) (17,596)
======== ========
Basic earnings per
share (cents) 7 (7.6) (11.9)
Diluted earnings per
share (cents) 7 (7.6) (11.9)
-------- --------
Consolidated statement of financial position
As at 31 December 2016
2016 2015
Note $'000 $'000
Non-current assets
Intangible assets 10 7,113 19,254
Property, plant and
equipment 591 1,003
Investments in equity
accounted associates 859 812
Deferred tax asset 4 166 716
8,729 21,785
-------- --------
Current assets
Trade and other receivables 7,950 16,280
Cash and cash equivalents 72,064 71,336
80,014 87,616
Total assets 88,743 109,401
======== ========
Equity
Share capital 5 14 14
Additional paid in
capital 130,292 131,287
Retained earnings (49,753) (39,791)
Equity attributable
to equity holders of
the parent 80,553 91,510
-------- --------
Non-current liabilities
Deferred tax liabilities 4 691 986
Deferred consideration 8 160 184
851 1,170
-------- --------
Current liabilities
Trade and other payables 7,096 15,316
Deferred consideration 8 243 1,405
7,339 16,721
-------- --------
Total equity and liabilities 88,743 109,401
======== ========
The financial statements were approved by the Board and
authorised for issue on 13 March 2017.
Ido Erlichman Moran Laufer
Chief Executive Officer Chief Financial Officer
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share Additional Retained Total
capital paid in earnings
capital
$'000 $'000 $'000 $'000
At 1 January 2015 15 136,399 (25,602) 110,812
Loss for the year - - (17,597) (17,597)
Other comprehensive
income:
Foreign exchange
differences on translation
of foreign operations - - 1 1
-------- ---------- --------- ----------
Total comprehensive
income for the year - - (17,596) (17,596)
Transactions with
owners:
Share based payments - - 3,407 3,407
Exercise of employee
options (note 5) - 18 - 18
Purchase of own shares
(note 5) (1) (5,130) - (5,131)
-------- ---------- --------- ----------
At 31 December 2015 14 131,287 (39,791) 91,510
======== ========== ========= ==========
At 1 January 2016 14 131,287 (39,791) 91,510
======== ========== ========= ==========
Loss for the year - - (10,678) (10,678)
Other comprehensive
income:
Foreign exchange - - - -
differences on translation
of foreign operations
-------- ---------- --------- ----------
Total comprehensive
income for the year - - (10,678) (10,678)
Transactions with
owners:
Share based payments - - 716 716
Purchase of own shares
(note 5) - (995) - (995)
-------- ---------- --------- ----------
At 31 December 2016 14 130,292 (49,753) 80,553
======== ========== ========= ==========
Consolidated statement of cash flows
For the year ended 31 December 2016
2016 2015
Note $'000 $'000
Cash flow from operating activities
Loss for the year after taxation (10,678) (17,597)
Adjustments for:
Amortisation of intangible
assets 10 9,421 8,974
Impairment of intangible assets 10 4,683 9,132
Depreciation of property,
plant and equipment 463 396
Loss on sale of property,
plant and equipment 35 -
Tax charge 4 665 2,902
Interest income (4) (15)
Interest expenses 51 210
Share based payment charge 6 716 3,407
Share of results of associates (47) 38
Unrealised foreign exchange
differences 4 660
Operating cash flow before
movement in working capital 5,309 8,107
Decrease/(Increase) in trade
and other receivables 8,327 (2,529)
Decrease in trade and other
payables (6,625) (631)
(Decrease)/Increase in other
current liabilities (1,089) 963
-------- --------
Cash flow from operations 5,922 5,910
Tax paid net of refunds (904) (1,826)
-------- --------
Cash generated from operations 5,018 4,084
Cash flow from investing activities
Purchases of property, plant
and equipment (108) (220)
Sale of property, plant and
equipment 24 -
Net cash paid on business
combination 8 (1,089) (902)
Intangible assets acquired (850) -
Net cash paid on Investment
in associates (350) (500)
Capitalisation of development
costs 10 (744) (1,593)
-------- --------
Net cash used in investing
activities (3,117) (3,215)
Cash flow from financing activities
Net payment for purchase of
own shares 5 (995) (5,131)
-------- --------
Net cash generated from financing
activities (995) (5,131)
-------- --------
Net (decrease)/increase in
cash and cash equivalents 906 (4,262)
Revaluation of cash due to
changes in foreign exchange
rates (178) (443)
Cash and cash equivalents
at beginning of year 71,336 76,041
-------- --------
Cash and cash equivalents
at end of year 72,064 71,336
======== ========
1. General information
The financial information provided is for Crossrider plc ("the
Company") and its subsidiary undertakings (together the "Group") in
respect of the financial years ended 31 December 2016 and 2015.
Crossrider is an online distribution and digital product
company. The Company utilises its proprietary marketing technology
platforms to prospect, optimise and monetise mobile and web media,
to create a superb user experience. The Company offers improved
retention and re-engagement rates, greatly enhancing the value of
user activity. Crossrider provides its platforms to its customers
for use with their products as well as developing and expanding its
own product portfolio.
Basis of preparation
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Group have adequate
resources to continue in operational existence for the foreseeable
future. They therefore continue to adopt the going concern basis of
accounting in preparing the financial statements.
The financial information set out in this document does not
constitute the Group's statutory financial statements for the year
ended 31 December 2016 or 31 December 2015. The annual report and
financial statements for the year ended 31 December 2016 were
approved by the Board of Directors on 13 March 2017 along with this
preliminary announcement. The financial statements for the year
ended 31 December 2016 have been reported on by the Independent
Auditor. The Independent Auditor's report on the financial
statements for 2016 was unqualified and did not draw attention to
any matters by way of emphasis.
The financial information set out in these preliminary results
has been prepared using International Financial Reporting Standards
(IFRSs) as adopted by the EU. The accounting policies adopted in
these preliminary results have been consistently applied to all the
years presented and are consistent with the policies used in the
preparation of the financial statements for the year ended 31
December 2015. The principal accounting policies adopted are
unchanged from those used in the preparation of the statutory
accounts for the period ended 31 December 2016. New standards,
amendments and interpretations to existing standards, which have
been adopted by the Group, have not been listed since they have no
material impact on the financial statements.
2. Segmental information
Segment revenues and results
During the period a major restructuring has been undertaken,
resulting in changes to the Group's management reporting. The
change in reporting provides a more accurate and transparent
description of activities. The Group now operates three reportable
segments:
-- App distribution - comprising the Group's app distribution platform;
-- Media - comprising the Group's ad network activities and
associated technology platforms; and
-- Web Apps and License - comprising revenue generated from
monetising web apps and licencing the associated technology
Consequently, the prior year segmental results have been
restated.
App distribution Media Web apps Total
2016 2016 and license 2016
2016
$'000 $'000 $'000 $'000
Revenue 38,241 13,783 4,508 56,532
Cost of sales (2,360) - - (2,360)
Direct sales and marketing
costs (24,614) (10,303) - (34,917)
---------------- -------- ------------ --------
Segment result 11,267 3,480 4,508 19,255
Central operating costs (12,842)
--------
Adjusted EBITDA(1) 6,413
Depreciation and amortisation (9,884)
Impairment of intangible
assets (4,683)
Employee share-based
payment charge (716)
Exceptional and non-recurring
costs (862)
--------
Operating loss (9,732)
Share of results of
associates 47
Finance income 4
Finance costs (332)
--------
Loss before tax (10,013)
Taxation (665)
--------
Loss after taxation (10,678)
Exceptional and non-recurring costs in 2016 comprised
non-recurring staff restructuring costs of $0.6 million and a $0.3
million one-time onerous contract written off in the period. The
decrease in the Employee share-based payment charge is due to
reversal of charges from previous periods for employees that left
the Company during the year.
The impairment of intangible assets charge of $4,683,000 relates
to the Media segment. After allocating this charge to the Media
segment, segment result is $1,203,000, loss.
App distribution Media Web apps Total
2015 2015 and license 2015
2015
$'000 $'000 $'000 $'000
Revenue 37,229 20,426 26,980 84,635
Cost of sales (1,854) 0 (5,534) (7,388)
Direct sales and marketing
costs (25,961) (16,927) (7,835) (50,723)
---------------- -------- ------------ --------
Segment result 9,414 3,499 13,611 26,524
Central operating costs (16,460)
--------
Adjusted EBITDA(1) 10,064
Depreciation and amortisation (9,370)
Impairment of intangible
assets (9,132)
Employee share-based
payment charge (3,407)
Exceptional and non-recurring
costs (1,957)
Operating loss (13,802)
Share of results of
associates (38)
Finance income 15
Finance costs (870)
--------
Loss before tax (14,695)
Taxation (2,902)
--------
Loss after taxation (17,597)
--------
Exceptional and non-recurring costs in 2015 comprise
non-recurring staff costs of $0.1 million and payments of
contingent consideration treated as remuneration in respect of the
Ajillion and Definiti Media acquisitions expensed through the
income statement of $1.9 million.
The impairment of intangible assets charge of $9,132,000 relates
to the Web apps and license segment. After allocating this charge
to the Web apps and license segment, segment result is
$4,479,000.
(1) Adjusted EBITDA is a company specific measure which is
calculated as operating loss before depreciation, amortisation,
exceptional and non-recurring costs, employee share-based payment
charges and impairment of intangible assets which are considered to
be one off and non-recurring in nature as set out in note 3. The
Directors believe that this provides a better understanding of the
underlying trading performance of the business.
Information about major customers
In 2016 and 2015 there were no customers contributing more than
10% of total revenue of the Group.
Geographical analysis of revenue
Revenue by origin
2016 2015
$'000 $'000
Europe 17,297 3,641
British Virgin Islands 27,520 68,300
Asia 11,715 12,694
------ ------
56,532 84,635
====== ======
Geographical analysis of non-current assets
2016 2015
$'000 $'000
Europe 3,990 10,245
British Virgin Islands - 87
Asia 3,714 9,925
----- ------
Total intangible assets
and property, plant and
equipment 7,704 20,257
===== ======
3. Operating loss
Operating loss has been arrived at after charging:
2016 2015
$'000 $'000
Exceptional and non-recurring
costs
Non-recurring staff
costs 562 95
Onerous contract 300 -
Expensed contingent
payments arising from
business combinations
(note 8) - 1,862
----- -----
862 1,957
----- -----
Auditor's remuneration:
Audit 147 97
Other services 21 20
Amortisation of intangible
assets 9,421 8,974
Depreciation 463 396
Impairment of intangible
assets (note 10) 4,683 9,132
Employee share-based
payment charge (note
6) 716 3,407
Rent payable under operating
leases 459 294
===== =====
Operating costs
Operating costs are further analysed as follows:
2016 2016 2015 2015
Adjusted Total Adjusted Total
$'000 $'000 $'000 $'000
Direct sales and
marketing costs 34,917 34,917 50,722 50,722
Indirect sales and
marketing costs 4,265 4,998 3,016 3,424
--------- ------- --------- --------
Selling and marketing
costs 39,182 39,915 53,738 54,146
-------------------------- --------- ------- --------- --------
Research and development
costs 1,299 1,661 2,539 3,500
Management, general
and administrative
cost 7,278 7,761 10,906 14,901
Depreciation and
amortisation 1,379 9,884 1,048 9,370
Impairment of intangible
assets - 4,683 - 9,132
--------- ------- --------- --------
Total operating
costs 49,138 63,904 68,231 91,049
========= ======= ========= ========
Adjusted operating costs exclude share based payment charges,
exceptional and non-recurring costs, amortisation of acquired
intangible assets and impairment of intangible assets.
4. Taxation
The parent company is domiciled, for tax purposes, in both the
Isle of Man and the UK. The final tax charge shown below arises
partially from the difference in tax rates applied in the
difference jurisdictions in which the subsidiaries'
jurisdictions.
The tax charge in the year 2015 of $2,902,000 includes an
exceptional tax charge of $2,200,000 arising as a result of the
change in previously established corporation tax guidance in Israel
relating to tax positions taken in respect of the 2013 and 2014
financial years. Of the $2,200,000 charge $1,200,000 has been
agreed and settled in relation to profits generated in Israel in
2013, which have subsequently been deemed to be taxable as a result
of revised OECD guidance and application. The remaining $1,000,000
has arisen from a retrospective change to the cost plus transfer
pricing methodology (which was established and ratified by Israeli
case law in 2015) on share option charges incurred by subsidiaries
in Israel in 2014. The Group continues to recognise a deferred tax
asset of $166,000 (2015: $716,000) in respect of tax losses
accumulated in previous years.
The total tax charge can be reconciled to the overall tax charge
as follows:
2016 2015
$'000 $'000
Loss before taxation (10,013) (14,695)
-------- --------
Tax at the applicable
tax rate of 20% (2015:
20%) (2,003) (2,939)
Tax effect of
Differences in overseas rates 976 2,233
Exceptional tax charge - 2,200
Expenses not deductible for tax
purposes 1,327 1,408
Deferred tax not recognised on
losses carried forward 440 -
Tax expense for previous years (75) -
Tax charge for the
year 665 2,902
======== ========
Analysed as:
Deferred taxation in
respect of the current
year 263 (463)
Current tax charge 402 3,365
-------- --------
Tax charge for the
year 665 2,902
======== ========
The group has maximum corporation tax losses carried forward at
each period end as set out below:
2016 2015
$'000 $'000
Corporate tax losses
carried forward 28,320 19,322
====== ======
Details of the deferred tax asset recognised (arising in respect
of losses) is set out below:
2016 2015
$'000 $'000
At the beginning of
the year 716 567
(Derecognised)/Recognised
in the year (558) 166
Foreign exchange revaluation 8 (17)
----- -----
At the end of the year 166 716
===== =====
Details of the deferred tax liability recognised (arising from
timing differences on intangible valuations on business
combinations) is set out below:
2016 2015
$'000 $'000
At the beginning of
the year 986 1,283
Movement in the year
due to temporary differences (295) (297)
----- -----
At the end of the year 691 986
===== =====
In addition, the Group has an unrecognised deferred tax asset in
respect of the following:
2016 2015
$'000 $'000
Tax losses carried
forward 28,047 10,729
====== ======
5. Shareholder's equity
2016 2015
Number Number
of Shares of Shares
Issued and paid up ordinary shares
of $0.0001 148,496,073 148,496,073
The issued share capital of the Company on incorporation was
10,000 ordinary share of $1.00 par value.
During the year a total of nil of new ordinary shares of $0.0001
par value were issued for cash in relation to share option schemes
resulting in cash consideration of $nil (2015: $18,000).
During the year a total of 1,250,000 of ordinary shares of
$0.0001 par value were purchased by the Company for a total cash
consideration of $994,952 and are held in treasury at the reporting
date (2015: $5,130,920).
As for 31 December 2016, the Company hold in the treasury total
of 7,451,423 of ordinary shares of $0.0001 per value (2015:
6,201,423).
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Additional paid Share premium (i.e. amount subscribed
in capital or share capital in excess of
nominal value)
Retained earnings Cumulative net gains and losses
recognised in the consolidated
statement of comprehensive income
6. Employee share based payments
Options have been granted under the Group's share option scheme
to subscribe for ordinary shares of the Company. At 31 December
2016, the following options were outstanding (2015:
14,481,158):
Group Grant date Number of shares under option Subscription price per share
Group 2 29 May 2014 1,182,790 $0.449
Group 3 29 May 2014 2,413,819 $0.538
Group 7 30 September 2014 854,940 $1.662
Group 8 21 April 2015 633,062 $1.523
Group 9 18 November 2015 200,000 $0.820
Group 10 5 January 2016 742,500 $0.820
Group11 31 May 2016 2,000,000 $0.402
Group 12 26 October 2016 2,232,272 $0.445
Total 10,259,383
==============================
Vesting conditions
Group 1 - Vested following the Initial Public Offering.
Group 2 - 50% at the end of the first year following the grant
date. 12.5% on a quarterly basis during 12 quarters period
thereafter.
Groups 3-12 - 25% at the end of the first year following the
grant date. 6.25% on a quarterly basis during 12 quarters period
thereafter.
The total number of shares exercisable as of 31 December 2016
was 3,840,679 (2015: 8,312,028).
The weighted average fair value of options granted in the year
using the Cox, Ross and Rubinstein's Binomial Model (the "Binomial
Model") was $0.26. The inputs into the Binomial model are as
follows:
2016 2015
$'000 $'000
Early exercise factor 100%-150% 100%-150%
Fair value of Group's
stock $0.40-$0.80 $0.75-$1.51
Expected Volatility 60% 60%
Risk free interest
rate 0.25-1.89% 0.5-1.93%
Dividend yield - -
Forfeiture rate 7%-14% 4%-13%
Expected volatility was determined based on the historical
volatility of comparable companies.
Forfeiture rate is assumed to be 7-14% for senior management and
26% for other employees.
The risk-free interest rate was estimated based on average
yields of UK Government Bonds.
The Group recognised total share based payments relating to
equity-settled share based payment transactions as follows:
2016 2015
$'000 $'000
Share-based payment
charge 716 3,407
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
2016 2015
---------------------- ---------------------
Weighted Number Weighted Number
average of average of
exercise options exercise options
price price
At the beginning
of the year $0.66 14,481,158 $0.577 13,869,357
Granted $0.51 5,338,272 $1.42 1,325,500
Lapsed $0.56 (9,560,047) $0.538 (680,665)
Exercised - - $0.538 (33,034)
--------- ----------- --------- ----------
At the end
of the year $0.66 10,259,383 $0.66 14,481,158
========= =========== ========= ==========
The options outstanding at 31 December 2016 had a weighted
average remaining contractual life of 7.9 years (2015: 8.5
years).
7. Earnings per share
Basic loss/earnings per share is calculated by dividing the loss
/earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year.
2016 2015
cents cents
Basic and diluted (7.6) (11.9)
Adjusted basic 2.7 4.8
Adjusted diluted 2.7 4.6
Adjusted earnings per share is a non-GAAP measure and therefore
the approach may differ between companies. Adjusted earnings have
been calculated as follows:
2016 2015
$'000 $'000
Loss for the year (10,678) (17,597)
Post tax adjustments:
Employee share-based
payment charge 823 3,343
Exceptional and non-recurring
costs 774 1,941
Amortisation on acquired
intangible assets 8,208 8,025
Impairment of intangible
assets 4,683 9,132
Exceptional tax charge - 2,200
Adjusted profit for
the year 3,810 7,044
======== ========
Number Number
Denominator - basic:
Weighted average number
of equity shares for
the purpose of earnings
per share 141,068,557 147,779,641
Denominator - diluted
Weighted average number
of equity shares for
the purpose of diluted
earnings per share 141,182,911 152,107,062
The diluted denominator has not been used where this has
anti-dilutive effect. Basic and diluted loss per share are
therefore the same for reporting purposes.
The difference between weighted average number of Ordinary
shares used for basic earnings per share and the diluted earnings
per share is 114,354 being the effect of all potentially dilutive
Ordinary shares derived from the number of share options granted to
employees.
8. Deferred consideration
(a) Acquisition of Definiti Media Limited
The consideration for the acquisition of Definiti Media Ltd in
May 2014 included $2,489,000 deferred consideration. Of this,
$845,000 was repaid during the year ending 31 December 2014,
$746,000 was repaid during the year ending 31 December 2015. The
remaining was repaid during the year ending 31 December 2016.
In addition, $1,427,000, included as part of the acquisition
arrangements, has been recognised directly in the income statement
during the year ending 31 December 2015 as set out in note 3.
(b) Acquisition of AjillionMax
The consideration for the acquisition of certain assets of
AjilionMAX Limited in May 2014 included $654,000 deferred
consideration. Of this $104,000 was repaid during the year ending
31 December 2014, $156,000 was repaid during the year ending 31
December 2015, $189,000 was repaid during the year ending 31
December 2016 and the remaining will be repaid during the year
ending 31 December 2017.
In addition, $435,000, included as part of the acquisition
arrangements, has been recognised directly in the income statement
during the year ending 31 December 2015 as set out in note 3.
(C) Investment in Clearvelvet Trading Ltd
In September 2015, the Group acquired 16.67% of the share
capital of Clearvelvet Limited for a total consideration of
$850,000, of which $350,000 was paid in 2016 on completion of
certain development milestones.
(D) Acquisition of DriverAgent intangibles
In October 2016, the Group acquired the intellectual property of
PC maintenance software product, DriverAgent, from eSupport.com,
Inc for a total consideration of $1.2 million. The consideration
included $0.2 million of deferred consideration which is contingent
on future results. Of this $48,000 is expected to be repaid during
the year ending 31 December 2017. The remaining is expected repaid
during the year ending 31 December 2018.
9. Related party transactions
The Group is controlled by Unikmind Holdings Limited
incorporated in British Virgin Islands, which owns 73% of the
Company's shares. The controlling party is the Solidinsight Trust,
established under the laws of the Isle of Man. Mr. Teddy Sagi is
the sole ultimate beneficiary of the Solidinsight Trust.
(a) Related party transactions
The following transactions were carried out with related
parties:
2016 2015
$'000 $'000
Revenue from common controlled
company 5,034 4,709
Technical support services to
end customers provided by common
controlled company (2,105) (1,226)
Payment processing services provided
by common controlled company (300) (774)
Office rent expenses to common
controlled companies (82) -
Revenue from equity investments 100 -
2,647 2,709
======= =======
(b) Receivables owed by related parties
2016 2015
Name Nature of transaction $'000 $'000
Parent company Unpaid share capital 10 10
Equity investments Loan and Trade 799 -
Companies related
by virtue of common
control Trade 1,022 1,501
1,831 1,511
===== =====
(c) Payables to related parties
2016 2015
Name Nature of transaction $'000 $'000
Amount owed to
Director - 1,151
Companies related
by virtue of common
control Other 20 425
20 1,576
===== =====
10. Intangible assets
Intellectual Trademarks Customer Goodwill Internet Capitalised Total
Property Lists Domains Software
Development
Costs
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2015 35,205 9,462 2,383 7,684 69 1,113 55,916
Additions - - - - - 1,593 1,593
At 31 December
2015 35,205 9,462 2,383 7,684 69 2,706 57,509
============= =========== ========= ========= ========= ============= =======
Additions 1,219 - - - - 744 1,963
------------- ----------- --------- --------- --------- ------------- -------
At 31 December
2016 36,424 9,462 2,383 7,684 69 3,450 59,472
============= =========== ========= ========= ========= ============= =======
Accumulated amortisation
At 1 January
2015 (16,367) (3,241) (400) - - (141) (20,149)
Charge for the
year (5,953) (1,892) (477) - - (652) (8,974)
Impairment losses (4,711) (1,341) (55) (2,316) - (709) (9,132)
--------- -------- -------- -------- -------- ---------
At 31 December
2015 (27,031) (6,474) (932) (2,316) - (1,502) (38,255)
========= ======== ======== ======== ======== =========
Charge for the
period (6,528) (1,494) (483) - - (916) (9,421)
Impairment losses - - - (4,683) - - (4,683)
--------- -------- -------- -------- -------- ---------
At 31 December
2016 (33,559) (7,968) (1,415) (6,999) - (2,418) (52,359)
========= ======== ======== ======== ======== =========
Net book value
At 1 January 2015 18,838 6,221 1,983 7,684 69 972 35,767
At 31 December
2015 8,174 2,988 1,451 5,368 69 1,204 19,254
======= ====== ====== ====== === ====== =======
At 31 December
2016 2,865 1,494 968 685 69 1,032 7,113
======= ====== ====== ====== === ====== =======
In October 2016, the Group exercised an option to acquire the
intellectual property of PC maintenance software product,
DriverAgent, from eSupport.com Inc for a total consideration of
$1,208,000. $150,000 from the consideration was paid in the year
ending 31 December 2015 for the option, $850,000 was paid during
the year ending 31 December 2016. Another $208,000 is deferred
consideration which is contingent on future results of the
product.
Goodwill acquired in a business combination is allocated at
acquisition to the cash generating units (CGUs), or group of units
that are expected to benefit from that business combination.
Following the change in reportable segments, the Group goodwill was
allocated to the Media segment. Before recognition of the
impairment charge, the goodwill has a carrying value as at 31
December 2016 of $5,368,000 (2015: $5,368,000).
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired. The recoverable amounts of the CGUs are determined from
value in use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates
and expected changes to selling prices and direct costs during the
period.
At 31 December 2016, before impairment testing, the carrying
value of intangible assets allocated to the Media CGU was
$9,417,000, including goodwill of $5,368,000. As a result of the
reduction in the management forecasted cash flows attributable to
the acquired intangible assets. The carrying value of the goodwill
has therefore been reduced to its recoverable amount of $685,000
through recognition of an impairment loss of $4,683,000.
For the Media CGU, the Group has prepared calculations based on
cash flow projections for the next five years from the most recent
budgets approved by management and extrapolated cash flows beyond
this period using an estimated growth rate of 1 per cent (2015: 1
per cent). This rate does not exceed the average long-term growth
rate for the relevant markets. The rate used to discount these
forecast cash flows is 25 per cent (2015: 25 per cent).
The discount rate used in the valuation of the Media CGU was 25
per cent. If the discount rate was increased by 1 percentage point
the impairment would increase by $176,000.
The discount rate used in the valuation of the Web apps and
license CGU was reduced to 10 per cent compared to 25 per cent in
2015 as cash flows are generated from two short term license
agreements and are considered to be at low risk.
The carrying value of goodwill and intangible assets by CGU less
provisions for impairment is set out as follows:
Web Apps Media App Distribution Total
and License
$'000 $'000 $'000 $'000
Carrying value before
impairment losses at
1 January 2016 974 9,417 1,405 11,796
Provisions for impairment - (4,683) - (4,683)
------------ ------- ---------------- -------
Net book value at 31
December 2016 974 4,734 1,405 7,113
============ ======= ================ =======
At 31 December 2015, before impairment testing, the carrying
value of intangible assets allocated to the web apps and License
CGU was $17,423,000, including goodwill of $2,316,000. Due to the
significant reduction in advertising volumes that management
believes can be achieved in the web extensions business in 2016 the
group has revised its cash flow forecasts for this CGU. The
carrying value of the intangible assets of the web apps and License
CGU has therefore been reduced to its recoverable amount of
$8,291,000 through recognition of an impairment loss of $9,132,000,
of which $2,316,000 has been allocated to goodwill.
Web Apps Media App Distribution Total
and License
$'000 $'000 $'000 $'000
Carrying value before
impairment losses at
the 1 January 2015 17,423 10,894 69 28,386
Provisions for impairment (9,132) - - (9,132)
------------ ------ ---------------- -------
Net book value at 31
December 2015 8,291 10,894 69 19,254
============ ====== ================ =======
The Group tests the useful economic life of the Intangible asset
whenever events or changes in circumstances indicate that the
useful economic life may need to be changed. The Web Apps initial
intellectual property and customer lists were fully amortised in
the year ending 31 December 2016 due to a change in management
assumptions with the expected useful life of these assets. If the
management assumption was not changed, the amortisation attributed
to the Web apps intellectual property and customer lists would be
$3,865,000 instead of $5,807,000.
11. Subsequent events
On 13 March 2017 the group acquired CyberGhost SRL, a company
incorporated in Romania, for initial consideration of EUR6.1
million and potential maximum consideration of EUR3 million.
CyberGhost is one of the leading cyber security SaaS providers,
with a focus on the provision of Virtual Private Network ("VPN")
solution. The acquisition meets the group's previously announced
intention to strengthen its B2C market reach, allowing it to
operate as a digital distribution and product platform, utilising
its existing technology and intellectual property.
Due to the acquisition being executed on the same date as the
authorisation of the financial statements the detailed acquisition
accounting has not yet been undertaken and is therefore incomplete.
It is anticipated that the acquisition will be accounted for in
full in the interim financial statements for the period ending 30
June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGMFZFMGNZZ
(END) Dow Jones Newswires
March 14, 2017 03:01 ET (07:01 GMT)
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