TIDMCKT
RNS Number : 9259L
Checkit PLC
16 September 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF UK MARKET ABUSE REGULATION . UPON THE PUBLICATION OF THIS
ANNOUNCEMENT THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE WITHIN
THE PUBLIC DOMAIN.
16 September 2021
Checkit plc
("Checkit" or the "Group")
Interim results for the six months ended 31 July 2021
Checkit plc (AIM: CKT) announces its unaudited results for the
six months ended 31 July 2021 (the "Period" or "H1 FY22") .
Highlights
-- Annual recurring revenue ("ARR") run rate of GBP6.6m at period end
-- Recurring revenue increased by 31%* to GBP3.1m (H1 FY21:
GBP2.4m), reflecting the Group's focus on SaaS (software as a
service) growth
-- Total revenue from continuing operations increased by 13%* to GBP7.9m (H1 FY21: GBP7.0m*)
-- Operating loss before non-recurring or special items of
GBP(1.7)m (H1 FY21: GBP(1.5)m), reflecting increased investment in
sales, marketing and product development
-- Cash at 31 July 2021 of GBP8.5m (31 January 2021: GBP11.5m)
-- Acquisition of Tutela Monitoring Systems LLC ("Tutela")
completed during the period, accelerating the Group's US
expansion
-- The Board remains confident about the prospects for the business
* The prior period's revenue has been normalised to illustrate
sales that would have been included in the Group's financial
results had Tutela, which was acquired on 4 February 2021, been
fully owned by the Group throughout both periods. Excluding the
acquisition of Tutela, Group revenue for the comparative period
last year was GBP6.4m.
Checkit plc
www.checkit.net
Kit Kyte (Chief Executive Officer)
Greg Price (Chief Financial Officer) +44 (0) 1223 643 313
Singer Capital Markets (Nominated Adviser
and Broker)
Shaun Dobson / Rachel Hayes / George
Tzimas +44 (0) 207 496 3000
Chief Executive Officer's Statement
I am pleased to present our H1 FY22 results, my first financial
report as CEO. In this report, you'll read about the seismic global
potential for intelligent operations to change the world of work
for a vast population of hundreds of millions of deskless workers
and to bring smart people, smart assets and smart buildings into a
single platform. We will be at the vanguard of the next phase of
digital transformation, leading a market that analysts value at
billions of dollars [1] .
This is only the beginning of Checkit's journey towards becoming
an industry leading SaaS business. The immediate target is to not
only surpass our first-half growth in ARR but also, as we emerge
from the global pandemic, to rapidly accelerate our expansion with
new and existing clients as we capitalise on the deskless worker
opportunity.
Bringing operations out of the dark
Reducing costs; retaining staff; cutting out waste; hitting
compliance targets and adapting to changing customer expectations:
these are some of the key issues keeping leaders awake at
night.
Dig deeper and you'll find that the activity of deskless workers
is crucial to addressing these challenges. But there's a problem
here. Deskless workers are operating in the dark. Their essential
everyday work - providing food, running supply chains, caring for
the sick and keeping buildings safe (to give a few examples) - is
often lost in a jumble of paperwork, spreadsheets and outdated
tech. Deskless workers are digitally disconnected, giving rise to
what we call 'dark operations'.
Organisations are exposed to risks they can't see and blind to
growth opportunities that go missing. Our expansion strategy
centres on our ability to address the global challenge of dark
operations.
Customers across food retail, healthcare, hospitality and other
industries can realise value from the Checkit platform in as little
as one month.
By digitising manual processes using digital assistants and
automating the reporting on essential assets and buildings through
advanced sensor networks, the Checkit platform can reduce staff
costs by as much as one shift per week, per site. The loss of
essential stock, such as food and medicine through wastage, is
dramatically reduced whilst further sales opportunities are
increased through algorithmically optimised product allocations
across sites. Our customers also report maintenance efficiencies,
reduced engineer visits and increased uptime.
Checkit improves staff training, engagement and retention. One
of our clients onboarded 7,500 staff with the Checkit platform in
less than four weeks.
Checkit strengthens compliance reporting and audits with online
data to reduce risk.
Above all, Checkit's advanced analytics provides insights for
both the mid and senior enterprise leadership level and enables
data-driven decision-making. Clients can build more agile and
resilient operating models whilst unlocking new sources of cost
reduction and improved customer experience.
One powerful platform
Checkit's technology vision unites people, assets and buildings
in one enterprise-class platform, creating an end-to-end solution
for operational excellence.
Digital assistants prompt, guide and capture essential activity,
helping staff to do the right thing at the right time, regardless
of their skill level or experience in the job. Evolving sensor
technology enables a large proportion of previously manual
equipment checks to be automated, liberating employees from
repetitive tasks such as fridge and freezer temperature readings.
Factor in smart building solutions which monitor and assist with
energy utilisation and asset optimisation (e.g. desk occupancy;
pipe monitoring; toilet cleanliness) and you have a complete
platform with powerful analytics providing a constant stream of
actionable insight.
The defining characteristic of the deskless industries we serve
is that they never stand still. And nor do we. In the current
financial year, we are adding a series of new features to our
platform:
Event-Driven Actions enable users of Checkit's monitoring
technology to feed sensor alerts from equipment or buildings
directly into a corrective workflow for rapid remediation and
action by frontline employees. With event-driven actions, the
platform delivers a step-by-step workflow direct to frontline staff
via their mobile device to guide them through the remedial action
they need to take. This ensures a rapid response to preserve stored
inventory, repair equipment and maintain safety, as well as
creating an audit report of corrective action.
Job Sharing is a tool for collaborative working that increases
frontline flexibility while capturing a single record of action
taken. It allows multiple staff to collaborate on a single
activity. The new feature means a particular set of activities,
ranging from laboratory opening procedures, to cleaning and food
safety checks, are not only assigned to one individual but can be
picked up by colleagues. This will be useful if a task is not
completed before a shift handover, or if remote teams want to
communicate and divide ad-hoc tasks between them to get work done
faster.
Checkit Franchise Edition allows common workflows such as food
safety procedures, site inspections, equipment maintenance and
opening/closing checks to be stored as templates in an online
library. This enables franchisors and other organisations to
implement consistent brand standards and safety routines across
their entire network of sites and apply benchmarks for measurement
against KPIs.
Revenue growth
Over the first half of the year, we have delivered new logo wins
across multiple geographies, whilst expanding our global footprint
with some of our strategic enterprise accounts. We have quadrupled
our pipeline of new business since the start of the year and have
advanced engagements with enterprise customers across retail,
healthcare, facilities management, franchise and pharmaceutical
industries. The conversations we are engaged in reveal a clear and
growing appetite to apply comprehensive digital solutions to their
operations.
H1 FY22 revenue from continued operations is shown below by
business unit (on a normalised basis).
Overall Group revenue grew 13% and recurring revenue by 31%
compared to the prior year on a normalised basis. 39% of revenue
was recurring, +5% vs H1 FY21 and reflects the shift towards a pure
SaaS business model.
ARR saw an increase of GBP0.9m (+16%) in the half year to close
at a run rate of GBP6.6m, predominantly driven by new subscription
contracts going live with customers.
Revenue (GBP'm): Six months to (HY)
30 July 30 July % Change
2021 2020*
Checkit Connect:
Recurring 2.9 2.2 +32%
(35)
Non-recurring 0.6 0.9 %
Total Checkit Connect 3.5 3.1 +12%
Checkit Connect US (Tutela)**:
Recurring 0.2 0.2 +13%
Non-recurring 0.7 0.7 (7) %
Total US 0.9 0.9 (2) %
Total Checkit BEMS (Non-recurring) 3.5 3.0 +19%
Checkit Group:
Recurring 3.1 2.4 +31%
Non-recurring 4.8 4.6 +4%
Total Group 7.9 7.0 +13%
* The prior period's revenue has been normalised to illustrate
sales that would have been included in the Group's financial
results had Tutela, which was acquired on 4 February 2021, been
fully owned by the Group throughout both periods. Excluding the
acquisition of Tutela, Group revenue for the comparative period
last year was GBP6.4m
Checkit Connect grew by 12% to GBP3.5m (H1 FY21: GBP3.1m).
Recurring revenues accounted for all this growth (+32% on a
normalised basis) and reflect the benefits of year-on-year ARR
growth realised in the half year.
Increased spending on the Group's sales, marketing and product
has reinforced Checkit's value proposition, particularly in the
healthcare and food retail industries, where Checkit is seeing
early signs of success in terms of pipeline growth and new customer
bookings as COVID-19 restrictions ease.
The decline in non-recurring revenue compared to the first half
of FY21 is primarily driven by timing and the on-going
repositioning towards a subscription-based pricing model adopted
across the Group during FY21.
Checkit Connect US has been introduced for FY22 reporting
purposes and reflects the performance of the newly created US based
business unit incorporating the acquisition in Q1 of Tutela LLC. It
should be regarded as a subsegment of Checkit Connect.
While US revenue declined slightly by 2% in the first half, this
included 13% growth in recurring revenue, which was driven by new
subscriptions. The US market is starting to scale up by recording
net new business success in the healthcare sector and through
on-going pricing conversions of existing customers into a
subscription-based model. The food retail and reviving hospitality
sectors are a focus for new business.
Checkit BEMS sales grew by 19% compared to the prior period.
This was due to a one-off significant project delivered in Q1. Its
revenues are expected to decline in the second half as a result of
the Group being more selective in pricing contracts. The Board
considers that its traditional projects and maintenance business
(which has historically generated low margins) has peaked as a
percentage of revenue.
The focus of this business unit will increasingly be on smart
building technology through the Checkit Connect platform and when
its transformation is complete, it is expected that this business
unit will be merged with Checkit Connect.
Operating performance
Gross profit increased from GBP2.3m to GBP3.5m representing
growth of over 50% compared with the prior period, reflecting the
overall increase in recurring revenue as a percentage of total
revenues. The Group will restate its reporting of gross profit at
the year end to exclude labour costs in line with industry standard
practice.
Operating costs (excluding non-recurring or special items)
increased by GBP1.4m to GBP5.2m. This was the result of increased
investment across the business to support its expansion, especially
in sales and marketing, as well as the effect of lapping the
measures put in place in the first half of last year to reduce
costs in response to the COVID-19 pandemic (including a salary
reduction programme and furlough scheme participation).
Costs increased from the introduction of the Checkit US business
unit, including the acquisition of Tutela. Investment in this
business unit resulted in additional costs of GBP0.6m, in line with
the Group's objective to reinvest to accelerate growth in the
region.
The business remains committed to investing in product
development. In total, GBP1.5m was invested in the product in H1
FY22 (H1 FY21: GBP1.0m), of which GBP0.6m was capitalised.
Overall, operating losses before non-recurring or special items
for H1 FY22 were GBP(1.7)m, an increase of GBP0.2m compared to H1
FY21 (GBP(1.5)m).
Cash
Cash at 31 July 2021 closed at GBP8.5m (vs. GBP11.5m at 31
January 2021). This reduction in cash was driven by operating
losses in the period, as well as an overall investment in business
activities of GBP1.3m. This reflects the acquisition of Tutela for
GBP0.4m (consideration of GBP0.6m, less cash acquired in the
business of GBP0.2m), as well as the capitalisation of development
costs of GBP0.6m and software costs relating to the digital
transformation programme of GBP0.3m.
Non recurring or special items
Non recurring or special items in the six months to 31 July 2021
related to the amortisation of acquired intangible assets and
restructuring and integration costs arising as the Group completes
its transformation programme to set itself up for growth.
People
The recruitment of high-calibre individuals has been a highlight
of the year to date.
In line with the company's aggressive growth agenda, Checkit's
sales and marketing teams doubled in size during the first half of
the year. Recent senior appointments include a new Global Vice
President of Sales (with a strong SaaS background), supported by a
rapidly growing sales team including top-performing enterprise
technology partners and strategic account managers with specialism
in IoT, retail digitisation and entrepreneurial business
development.
The growing geographical reach of Checkit has resulted in an
expansion of the US-based team. The US sales team has been
bolstered with the addition of specialists in technology for
healthcare and quick-service restaurants.
New senior appointments in the Product Engineering team include
a new Head of Delivery and a Head of Development Operations, both
of whom bring considerable experience in scaling and transforming
teams and a wealth of knowledge and experience from product focused
SaaS companies.
These new hires bring significant skills and expertise into
Checkit. As part of our own digital transformation, we are aligning
functional teams and technology to create an even stronger
springboard for future growth. In addition, an exciting product
roadmap has been developed to evolve our solution in line with the
current and future needs of the key industries we serve.
Outlook
Checkit is accelerating out of the COVID-19 crisis. We continue
to scale our growth through increased investment in sales and
marketing and product development. We believe the world has hit an
inflection point in the way in which people work and the pandemic
has only increased the urgency and pace of digital adoption by
enterprise level customers, who are seeking to solve the challenges
faced by their deskless workforces. We believe that Checkit is
uniquely positioned to lead a market that is estimated to include
2.7 billion frontline and deskless workers [2] . We are now
expanding our global footprint with both existing and new customers
as they uncover further benefits and business use cases that can be
powered by the Checkit software platform and sensor ecosystem.
We are excited about the future. We are confident that our focus
is in the right place and we will continue to invest cash wisely in
order to deliver upon our aggressive growth ambitions. The Board
remains confident about the outlook for the current year.
Consolidated statement of comprehensive income
unaudited interim results to 31 July 2021
Restated*
Unaudited Unaudited
Half Half Audited
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
------------------------------------------------ --------- ---------- -----------
Revenue (Note 2) 7.9 6.4 13.2
Cost of sales (4.4) (4.1) (8.5)
------------------------------------------------ --------- ---------- -----------
Gross profit 3.5 2.3 4.7
Operating expenses
------------------------------------------------ --------- ---------- -----------
Net operating expenses (excluding non-recurring
or special items) (5.2) (3.8) (7.8)
Operating loss before non-recurring or
special items (1.7) (1.5) (3.1)
Non-recurring or special items (Note
3) (1.0) (1.2) (2.2)
------------------------------------------------ --------- ---------- -----------
Total operating expenses (6.2) (5.0) (10.0)
------------------------------------------------ --------- ---------- -----------
Operating loss (2.7) (2.7) (5.3)
Finance income - - -
------------------------------------------------ --------- ---------- -----------
Loss before taxation (2.7) (2.7) (5.3)
Taxation (Note 4) 0.1 0.1 0.3
------------------------------------------------ --------- ---------- -----------
Loss from continuing operations (2.6) (2.6) (5.0)
Profit from discontinued operations (Note
5) - 0.5 0.6
------------------------------------------------ --------- ---------- -----------
Loss for the period attributable to equity
shareholders (2.6) (2.1) (4.4)
------------------------------------------------ --------- ---------- -----------
Other comprehensive expense
Exchange differences on translation of - -
foreign operations -
Total other comprehensive income - - -
------------------------------------------------ --------- ---------- -----------
Total comprehensive expense for the period
attributable to equity shareholders (2.6) (2.1) (4.4)
------------------------------------------------ --------- ---------- -----------
Loss per share (Note 7)
Continuing (4.2)p (4.3)p (8.3)p
Discontinued - 0.8p 1.0p
------------------------------------------------ --------- ---------- -----------
The accompanying notes form an integral part of this
consolidated interim financial information.
* See Note 8.
Consolidated balance sheet
unaudited at 31 July 2021
Restated*
Unaudited Unaudited Audited
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
-------------------------------------- --------- ---------- -----------
Assets
Non-current assets
Goodwill arising on acquisition 4.5 4.3 4.3
Capitalised development costs 0.6 - -
Other intangible assets 1.7 2.3 1.7
Property, plant and equipment 0.7 0.9 0.8
-------------------------------------- --------- ---------- -----------
Total non-current assets 7.5 7.5 6.8
-------------------------------------- --------- ---------- -----------
Current assets
Inventories 1.4 1.6 1.1
Trade and other receivables 3.8 3.9 4.9
Cash and cash equivalents 8.5 13.4 11.5
-------------------------------------- --------- ---------- -----------
Total current assets 13.7 18.9 17.5
-------------------------------------- --------- ---------- -----------
Total assets 21.2 26.4 24.3
-------------------------------------- --------- ---------- -----------
Current liabilities
Trade and other payables 5.3 5.1 5.6
Lease liabilities 0.2 0.4 0.3
-------------------------------------- --------- ---------- -----------
Total current liabilities 5.5 5.5 5.9
-------------------------------------- --------- ---------- -----------
Non-current liabilities
Long-term provisions 0.3 0.2 0.3
Lease liabilities 0.2 0.3 0.2
Deferred tax 0.2 0.5 0.3
-------------------------------------- --------- ---------- -----------
Total non-current liabilities 0.7 1.0 0.8
-------------------------------------- --------- ---------- -----------
Total liabilities 6.2 6.5 6.7
-------------------------------------- --------- ---------- -----------
Net assets 15.0 19.9 17.6
-------------------------------------- --------- ---------- -----------
Equity attributable to equity holders
of the parent
Called-up share capital 3.1 3.1 3.1
Share premium 5.4 5.4 5.4
Capital redemption reserve 6.4 6.4 6.4
Other reserves 0.1 0.1 0.1
Retained earnings - 4.9 2.6
-------------------------------------- --------- ---------- -----------
Total equity 15.0 19.9 17.6
-------------------------------------- --------- ---------- -----------
The accompanying notes form an integral part of this
consolidated interim financial information.
* See Note 8.
Consolidated statement of changes in equity
unaudited interim results to 31 July 2021
Capital
Share Share redemption Own Other Retained
capital premium reserve Shares* reserves earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- ----------- -------- --------- --------- -----
At 1 February 2020
(as reported) 3.1 5.4 6.4 (0.7) - 0.1 14.3
Restatement of Intangible
Assets - - - - - 7.1 7.1
-------------------------- -------- -------- ----------- -------- --------- --------- -----
At 1 February 2020
(as restated) 3.1 5.4 6.4 (0.7) - 7.2 21.4
Loss for the period
(as reported) - - - - - (1.1) (1.1)
Restatement of Intangible
Assets - - - - - (1.0) (1.0)
-------------------------- -------- -------- ----------- -------- --------- --------- -----
Total comprehensive
income for the period - - - - - (2.1) (2.1)
Share-based payments - - - - 0.1 - 0.1
Correction of reserve
classification - - - 0.2 - (0.2) -
Own shares sold* - - - 0.5 - - 0.5
-------------------------- -------- -------- ----------- -------- --------- --------- -----
Transactions with
owners - - - 0.7 0.1 (0.2) 0.6
-------------------------- -------- -------- ----------- -------- --------- --------- -----
At 31 July 2020 (as
reported) 3.1 5.4 6.4 - 0.1 (1.2) 13.8
Restatement of Intangible
Assets - - - - - 6.1 6.1
-------------------------- -------- -------- ----------- -------- --------- --------- -----
At 31 July 2020 (as
restated) 3.1 5.4 6.4 - 0.1 4.9 19.9
Loss for the period - - - - - (2.3) (2.3)
-------------------------- -------- -------- ----------- -------- --------- --------- -----
Total comprehensive
income/(expense)
for the period - - - - - (2.3) (2.3)
At 1 February 2021 3.1 5.4 6.4 - 0.1 2.6 17.6
Loss for the period - - - - - (2.6) (2.6)
-------------------------- -------- -------- ----------- -------- --------- --------- -----
Total comprehensive
income for the period - - - - - (2.6) (2.6)
-------------------------- -------- -------- ----------- -------- --------- --------- -----
At 31 July 2021 3.1 5.4 6.4 - 0.1 - 15.0
-------------------------- -------- -------- ----------- -------- --------- --------- -----
The accompanying notes form an integral part of this
consolidated interim financial information.
* The own shares were held by the Elektron Technology 2012
Employee Benefit Trust. All of the own shares were sold by the
trust during the prior period, resulting in a gain.
Consolidated statement of cash flows
unaudited interim results to 31 July 2021
Restated*
Unaudited Unaudited
Half Half Audited
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
-------------------------------------------- --------- ---------- -----------
Net cash flows from operating activities
Loss before taxation
- From continuing operations (2.7) (2.7) (5.3)
- From discontinued operations - 0.5 0.6
Adjustments for:
Depreciation charge 0.3 0.4 0.6
Amortisation of other intangibles 0.8 0.7 1.3
Gain on the sale of discontinued operations - (0.5) (0.5)
Share based payments - - 0.1
-------------------------------------------- --------- ---------- -----------
Operating cash flows before working capital
changes (1.6) (1.6) (3.2)
Decrease/(increase) in trade and other
receivables 0.9 0.4 (0.9)
Decrease/(increase) in inventories (0.2) 0.1 0.6
Increase/(decrease) in trade payables (0.7) - 0.6
-------------------------------------------- --------- ---------- -----------
Operating cash flows after working capital
changes (1.6) (1.1) (2.9)
Decrease in provisions - - -
-------------------------------------------- --------- ---------- -----------
Cash (used in)/generated by operations (1.6) (1.1) (2.9)
Tax - - -
-------------------------------------------- --------- ---------- -----------
Net cash flows (used in)/generated by
operating activities (1.6) (1.1) (2.9)
-------------------------------------------- --------- ---------- -----------
Investing activities
Interest received on bank deposits - - -
Purchase of property, plant and equipment (0.2) - (0.3)
Purchase of business (net of cash acquired) (0.4) - -
Capitalisation of development costs (0.6) - -
Capitalisation of other intangible assets (0.3) - -
Disposal of businesses (net of cash sold) 0.2 - 0.3
-------------------------------------------- --------- ---------- -----------
Net cash (used in)/generated by investing
activities (1.3) - -
-------------------------------------------- --------- ---------- -----------
Cash flows from financing activities
Sale of own shares - 0.5 0.5
Repayment of contract lease liabilities (0.1) (0.3) (0.4)
-------------------------------------------- --------- ---------- -----------
Net cash generated by/(used in) financing
activities (0.1) 0.2 0.1
-------------------------------------------- --------- ---------- -----------
Net (decrease)/increase in cash and cash
equivalents (3.0) (0.9) (2.8)
Cash and cash equivalents at the beginning
of the period 11.5 14.3 14.3
-------------------------------------------- --------- ---------- -----------
Cash and cash equivalents at the end
of the period 8.5 13.4 11.5
-------------------------------------------- --------- ---------- -----------
The accompanying notes form an integral part of this
consolidated interim financial information.
* See Note 8.
Notes to the unaudited interim results
to 31 July 2021
1. Accounting policies
The interim financial information has been prepared under
international accounting standards in conformity with the
requirements of the Companies Act 2006. Full details of accounting
policies are included in the Annual Report for the year ended 31
January 2021. Fixed annual charges are apportioned to the interim
period on the basis of time elapsed. Other expenses unless
disclosed otherwise are accrued in accordance with the same
principles used in the preparation of the annual accounts.
2. Segmental reporting - continuing operations
Revenues
The following table presents the different revenue streams of
Checkit:
Half Half
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
-------------------------------------- -------- -------- -----------
Recurring revenues from subscription
services 3.1 2.3 5.1
Installation, maintenance and support 4.8 4.1 8.1
-------------------------------------- -------- -------- -----------
Total 7.9 6.4 13.2
-------------------------------------- -------- -------- -----------
The Group considers its operations to be in the following
geographical regions:
Half Half
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
Geographic GBPm GBPm GBPm
--------------- -------- -------- -----------
United Kingdom 7.0 6.2 12.7
The Americas 0.9 0.2 0.5
--------------- -------- -------- -----------
Total 7.9 6.4 13.2
--------------- -------- -------- -----------
3. Non-recurring or special items
Non-recurring or special items are disclosed separately to
improve visibility of the underlying business performance.
Management has defined such items as costs associated with the
acquisition of businesses, restructuring, site closure costs and
other non-recurring items incurred outside the normal course of
business.
Half Half
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
------------------------------------------- -------- -------- -----------
Cash items
Costs of acquisition - - 0.1
Restructuring and integration costs 0.3 0.5 0.8
------------------------------------------- -------- -------- -----------
0.3 0.5 0.9
------------------------------------------- -------- -------- -----------
Non-cash items
Amortisation of acquired intangible assets 0.7 0.7 1.3
------------------------------------------- -------- -------- -----------
0.7 0.7 1.3
------------------------------------------- -------- -------- -----------
Total non-recurring or special items 1.0 1.2 2.2
------------------------------------------- -------- -------- -----------
4. Taxation
The tax credit on the loss from continuing operations before
taxation has been estimated at GBP0.1m (H1 FY21: GBP0.1m; FY21:
GBP0.3m). The Group has in excess of GBP17m of tax losses carried
forward.
5. Discontinued operations
During the prior year, the Group sold assets relating to its
Elektron Eye Technology business. Consequently, the business
continues to be included as discontinued operations.
Half Half
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
------------------------------------------------ -------- -------- -----------
Revenues 0.2 0.3 0.3
Expenses (0.2) (0.3) (0.2)
Profit before tax - - 0.1
Attributable tax - - -
------------------------------------------------ -------- -------- -----------
Profit after tax - - 0.1
Gain on disposal on remeasurement to
fair value - - 0.5
Attributable tax to gain on disposal - - -
------------------------------------------------ -------- -------- -----------
Profit from discontinued operation attributable
to equity shareholders - 0.5 0.6
------------------------------------------------ -------- -------- -----------
Foreign currency reserve reclassification - - -
------------------------------------------------ -------- -------- -----------
Other comprehensive income from discontinued
operations - - -
------------------------------------------------ -------- -------- -----------
Elektron Eye Technology
The results of the EET discontinued operation, which have been
included in the consolidated statement of comprehensive income,
were as follows:
Restated
Half Half
year year Year
to to to
31 July 31 July 31 January
2021 2020 2021
GBPm GBPm GBPm
------------------------------------------ -------- -------- -----------
Revenue 0.2 0.3 0.3
Expenses (0.2) (0.3) (0.2)
------------------------------------------ -------- -------- -----------
Profit before tax - - 0.1
Attributable tax - - -
------------------------------------------ -------- -------- -----------
Profit from discontinued operation before
gain on disposal - - 0.1
Remeasurement of assets to fair value - - -
Gain on disposal - 0.5 0.5
Attributable tax to gain - - -
------------------------------------------ -------- -------- -----------
Profit from EET discontinued operation - 0.5 0.6
------------------------------------------ -------- -------- -----------
On 1 July 2020 and 13 January 2021, the Group disposed of assets
relating to its Elektron Eye Technology business for a total net
proceeds of GBP0.9m, payable in 24 monthly instalments. GBP0.4m
remains payable as deferred consideration at the end of the half
year to 31 July 2021.
GBPm
-------------- ----
Consideration 0.9
Assets sold 0.4
-------------- ----
Gain on sale 0.5
-------------- ----
6. Businesses acquired - Tutela Monitoring Systems LLC
On 4 February 2021, the Group acquired 100% of the equity of
Tutela Monitoring Systems LLC ("Tutela"), a US-based business.
Tutela was previously owned by Next Control Systems Limited (now
Checkit UK Limited, a subsidiary of the Group), before Next Control
Systems Limited was acquired by the Group in May 2019. It was sold
to the US management team of Tutela in August 2018.
Tutela, which is based in Florida, provides wireless temperature
monitoring systems for all applications and facilities which store
sensitive inventory for businesses within the healthcare sector.
The Group intends to utilise Tutela as a platform to pursue all
industries and verticals targeted by Checkit.
The acquisition serves to accelerate the Group's US expansion
plans, providing a footprint and an opportunity to add further
scale. The Directors believe that, based on relative population
sizes, the US represents an addressable market around five times
larger than the UK, and therefore believe the acquisition
represents a significant milestone in its growth strategy.
The details of the business combination are as follows:
Fair value of consideration transferred GBPm
Amount Settled in cash 0.6
Deferred consideration outstanding
from 2018 sale 0.1
------------------------------------------- ------
Recognised amounts of identifiable
net assets
Other Intangibles 0.3
------------------------------------------ ------
Total non-current assets 0.3
------------------------------------------- ------
Inventories 0.1
Trade and other receivables 0.1
Cash and cash equivalents 0.2
Total current assets 0.4
------------------------------------------ ------
Trade and other payables (0.2)
Total current liabilities (0.2)
------------------------------------------- ------
Total non-current liabilities -
------------------------------------------- ------
Identifiable net assets 0.5
-------------------------------------------
Goodwill on acquisition 0.2
------------------------------------------- ------
Consideration settled in cash 0.6
Cash and cash equivalents acquired 0.2
------------------------------------------- ------
Net cash outflow on acquisition 0.4
------------------------------------------- ------
Consideration transferred
The acquisition of Tutela was settled in cash amounting to
GBP0.6m. Acquisition related costs amounting to GBP0.1m were
expensed and treated as a non-recurring item. Deferred
consideration of GBP0.1m outstanding from the 2018 sale was
discharged on acquisition.
Identifiable net assets
The fair value of the trade and other receivables acquired as
part of the business combination amounted to GBP0.2m, with a gross
contractual amount also being GBP0.2m. As of the acquisition date,
the Group expected to collect the full balance of the contractual
cashflow.
Separable intangible assets
Two separable intangible assets were identified at acquisition,
being the sole distributorship agreement and the acquired customer
list.
The sole distributorship agreement represents a re-acquired
asset from the 2018 sale, for which a price of $300K was paid at
the time. The asset has been valued on the basis of the remaining
term of the agreement. The useful life has been set as 1.9
years.
The acquired customer list was valued by assessing a discounted
cashflow based on expected customer attrition rates and using a
discount factor of 28.8%. The useful life has been estimated at 3
years.
Goodwill
Goodwill is primarily related to the core growth expectations,
expected future profitability and expected business synergies.
Goodwill has been allocated to the Checkit segment and is not
expected to be deductible for tax purposes.
Tutela's contribution to the Group results
Tutela US LLC generated a profit of less than GBP0.1m for the
period from 04.02.21 to the reporting date. Revenue for the period
to 31 July 2021 was GBP0.9m.
In the year ending 31 December 2020, Tutela's sales were
approximately $2m (GBP1.46m) with profit before tax of $0.27m
(GBP0.20m) and net assets (including cash) amounting to $0.16m
(GBP0.12m). If the businesses had been consolidated during that
period, approximately GBP1 million would have been added to Group
sales per annum after eliminating intercompany sales on
consolidation.
7. Earnings per share
Earnings per share (EPS) is the amount of post-tax profit
attributable to each share (excluding those held by the
Company).
Basic EPS measures are calculated as the Group profit for the
period attributable to equity shareholders divided by the weighted
average number of shares in issue during the period.
Diluted EPS takes into account the dilutive effect of all
outstanding share options priced below the market price, in
arriving at the number of shares used in its calculation. However,
in this case, as set out in IAS 33, the potential ordinary shares
cannot be treated as dilutive as their conversion to ordinary
shares would decrease loss per share from continuing operations,
resulting in basic and diluted measures being the same.
31 July 31 July 31 January
2021 2020 2021
Key Million Million Million
------------------------------------ ---- -------- -------- ----------
Weighted average number of ordinary
shares for the purposes of basic
earnings per share A 62.4 60.9 61.5
------------------------------------ ---- -------- -------- ----------
31 July 31 July 31 January
2021 2020 2021
(Loss)/earnings for the period Key GBPm GBPm GBPm
------------------------------------- ---- ------- ------- ----------
(Loss) for the period B (2.6) (2.1) (4.4)
Profit from discontinued operations,
net of tax C - (0.5) (0.6)
------------------------------------- ---- ------- ------- ----------
Continuing loss for the period D (2.6) (2.6) (5.0)
Total non-recurring or special items
net of tax 0.9 1.1 1.9
Continuing loss adjusted for EPS E (1.7) (1.5) (3.1)
------------------------------------- ---- ------- ------- ----------
31 July 31 July 31 January
Key 2021 2020 2021
--------------------------------- ------ ------- ------- ----------
Continuing EPS measures
Basic and diluted D/A (4.2)p (4.3)p (8.3)p
--------------------------------- ------ ------- ------- ----------
Adjusted continuing EPS measures
Basic and diluted E/A (2.7)p (2.5)p (5.2)p
--------------------------------- ------ ------- ------- ----------
Discontinued EPS measures
Basic and diluted (C)/A - 0.8p 1.0p
--------------------------------- ------ ------- ------- ----------
Total EPS measures
--------------------------------- ------ ------- ------- ----------
Basic and diluted B/A (4.2)p (3.4)p (7.3)p
--------------------------------- ------ ------- ------- ----------
8. Restatement
To align the treatment and valuation of intangible assets and
the associated deferred tax liability as at 31 July 2020 with the
treatment in the audited accounts as at 31 January 2021, goodwill
and intangible assets have been increased by GBP6.6m and deferred
tax liabilities by GBP0.5m. The impact on the net asset position
was an increase of GBP6.1m at 31 July 2020 as a result of this
reclassification.
9. Cautionary statement
This interim financial information has been prepared only for
the shareholders of Checkit plc as a whole and its sole purpose and
use is to assist shareholders to exercise their governance rights.
Checkit plc and its Directors and employees are not responsible for
any other purpose or use or to any other person in relation to this
report.
The report contains indications of likely future developments
and other forward-looking statements that are subject to risk
factors associated with, among other things, the economic and
business circumstances occurring from time to time in the
countries, sectors and business segments in which the Group
operates. Key risks and their mitigation have not changed
materially in the period from those disclosed on pages 32 to 35 of
the annual financial statements for the year ended 31 January
2021.
These and other factors could adversely affect the Group's
results, strategy and prospects. Forward-looking statements involve
risks, uncertainties and assumptions. They relate to events and/or
depend on circumstances in the future which could cause actual
results and outcomes to differ materially from those currently
anticipated. No obligation is assumed to update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
10. Other information
The financial information in this statement does not constitute
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The financial information in respect of the
year ended 31 January 2021 has been extracted from the statutory
accounts, which have been filed with the Registrar of Companies.
The independent auditor's report on those accounts was unqualified
and did not contain a statement under Sections 498(2) or 498(3) of
the Companies Act 2006.
[1] Emergence Capital - State of Frontline Technology, May 2021
https://www.youtube.com/watch?v=0vNwmEdIU18
[2] Emergence Capital - The State of Technology for the Deskless
Workforce
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END
IR BIGDCDBBDGBU
(END) Dow Jones Newswires
September 16, 2021 02:00 ET (06:00 GMT)
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