23 May 2017

1Spatial plc (AIM: SPA)

 

("1Spatial", the "Company" or the "Group")

 

Final results for the year ended 31 January 2017

 

 

The Board of directors of 1Spatial (the "Board"), the global spatial software and solutions company which manages the world's largest spatial data is pleased to announce the Company and consolidated group's (the "Group") audited final results for the year ended 31 January 2017.

 

Highlights       

 

Financial highlights

 

Continuing operations

·      Revenues from continuing operations of £22.1m (2016: £18.3m), reflecting a full year's inclusion of Enables IT UK acquired in July 2015 and 1Spatial Inc., control of which was acquired in February 2016

·      Recurring revenues of 40% (2016: 41%) providing visibility of earnings

·      Gross profit margin of 44% (2016: 58%)

·      Decrease in adjusted* EBITDA on prior year, down £3.3m to £0.4m loss (2016: £2.9m profit)

·      Increase of £14.8m in operating loss, from £0.7m to £15.5m

·      Trading update on 20 December 2016 to revise outlook

  

Discontinued operations

·        Loss from discontinued operations of £3.5m (2016: £0.6m profit)

 

All operations

·        Loss after tax of £18.3m (2016: £12k profit)

·      Impairments of continuing operations totalling £9.4m: £5.1m of goodwill, £1.5m of acquired intangibles (customer lists and software) and £2.8m of capitalised development costs

·      Impairments of discontinued operations totalling £1.8m: £0.9m of goodwill and £0.9m of capitalised development costs

·      Net funds of £0.6m (2016: £5.0m)

·      Overdraft facility of £3m renewed  in May 2017

·      Raised £0.9m in the year to pay the second tranche of capital for 1Spatial Inc. (previously LSI)

 

*Adjusted for strategic, integration, other one-off items and share-based payment charge 

 

Operational highlights

 

·        Significant Board changes during the year including the following:

-       Andy Roberts appointed Chairman in September 2016, becoming Executive Chairman from 30 December 2016

-       Claire Milverton (CFO) appointed Acting CEO from 30 December 2016

-       Nicole Payne appointed FD in March 2017

-       Marcus Hanke no longer CEO from 30 December 2016

-       Marcus Yeoman (Non-Executive Director) resigned and Mike Sanderson (Executive Director) retired in January 2017

 

·        Disposal and closure of loss-making businesses

-       Sale of Avisen UK Limited in December 2016 for £0.1m receivable in December 2017

-       Closure of Storage Fusion Limited in December 2016

 

·        Investment in US business with key hires in sales, including Sheila Steffenson, who was made President of the US business subsequent to the year end, and pre-sales.  Sheila has significant experience in the US Geospatial market and working with our key customers and partners such as US Census Bureau and ESRI.

 

·        Global launch of the Group's "1Integrate for ArcGIS" product, which runs on the ESRI platform.

 

·       Further delivery on the US Census Bureau contract providing core infrastructure spatial technology enabling the Census team to lay the foundations for the 2020 decennial census.

 

·        1Spatial's unique 1Integrate product was patented in the US in January 2017.

 

Post period-end

 

·        Disposal of significant share of loss-making business Enables IT Inc. in March 2017 for £0.1m receivable in March 2019.

 

·        Renewal of £3m banking overdraft facility with Natwest Bank plc which should provide a sufficient working capital for the business for the foreseeable future.

 

·      In April 2017, the Group exercised its final option to acquire the remaining 27% of 1Spatial Inc. for US$0.9m (£0.7m) through the issue of shares taking its ownership to 100%.  This acquisition positions the business to focus on the US market which is a growth market for 1Spatial working alongside key customers and partners such as US Census and ESRI.

 

·        In April 2017 1Spatial acquired the 51% of Sitemap Ltd that it did not already own for £0.2m through the issue of shares.

 

Commenting on the results Executive Chairman Andy Roberts, said:

 

"1Spatial is well-positioned in a very viable and interesting part of the market and has developed a unique patented technology that we now need to fully extend and exploit. We have a strong management team, which combined with our in-depth subject matter expertise and technology-led solutions and services, gives the business the opportunity to develop into a significant force in the market.

 

Early trading in Q1 2018 has been strong, and our workforce is fully informed, motivated and energised.  This financial year is focused on establishing a sound growth platform for the future, in order to fully maximise the opportunity presented by our technology and leverage the key partnerships that we are now fully engaged with.

 

I am confident that we are now well placed to grow a substantial, profitable and cash-generative business out into the future."

 

For further information, please contact:

 

  1Spatial plc                                                                                         0203 427 5004

  Andrew Roberts / Claire Milverton

 

  FTI Consulting                                                                                   020 3727 1000

  Dwight Burden / Alex Le May

 

  N+1 Singer                                                                                         020 7496 3000

  Shaun Dobson / Lauren Kettle

 

 

About 1Spatial

 

1Spatial plc is a group of market leading software and solutions companies trading under the brands 1Spatial and Enables IT.

 

1Spatial

 

1Spatial manages the world's largest spatial big data and works with users and creators of the largest geospatial databases, helping them collect, store, manage and interpret location-specific information. 1Spatial's clients include national mapping and cadastral agencies, utility and telecommunications companies, and government departments including emergency services, defence and census bureaus.

 

A leader in the field, 1Spatial has over forty years' experience and a record of continual innovation and development.  Today, with an ever increasing reliance on spatial and location-critical data, demand for our expertise has never been greater.

 

1Spatial operates globally, and has a portfolio of customers both in the Commercial and Government sector, with headquarters in Cambridge, UK and offices in the US, France, Belgium, Ireland and Australia.

 

Enables IT

 

Enables IT provides IT Managed Services. It offers public, private and hybrid cloud offerings with everything from Backup-as-a-service through to managed desktops. Their end-to-end IT capability provides everything from consultancy and project management, to the installation of physical infrastructure.

 

Clients trust Enables IT to manage their systems and secure their data. From Healthcare to Education and from Financial Services to Legal, leading organisations rely on Enables IT to ensure their IT is an asset, not a liability.

 

To find our more, visit www.1spatial.com

 

Executive Chairman's report

 

I am pleased to present my first report for 1Spatial plc, for the year ended 31 January 2017, since being appointed to the Board as Non-Executive Chairman in September 2016, and Executive Chairman from the start of January 2017.

 

Performance

 

The financial year ended 31 January 2017 was a very difficult year for the business.  The strategy and operational execution of the business was inconsistent and muddled.  As a result, a slow-down in sales from the core business, combined with a lack of timely execution and poor teamwork, led to an operating loss for the year.

 

Results

 

The results for the year ended 31 January 2017 showed an adjusted EBITDA * loss of £0.4m which was in line with the trading update of 20 December 2016 and the Group closed the financial year within its banking facilities with net funds of £0.6m at 31 January 2017. 

 

The actual results for the year from continuing operations were revenues of £22.1m (2016: £18.3m), adjusted EBITDA loss of £0.4m (2016: adjusted EBITDA profit of £2.9m), an operating loss of £15.5m (2016: £0.7m), a loss from discontinued operations £3.5m (2016: profit of £0.6m) and a loss for the year of £18.3m (2016: £12k).  The Group ended the year with £4.4m less cash than at the start of the year.

 

Since January 2017, there has been a renewed focus on the business; a strategic review has led to the restructure of the Company making it leaner and commercially focussed. 

 

The key objective for the year to 31 January 2018 is to ensure that we generate cash and profitable adjusted EBITDA, as well as follow through on key strategic initiatives which will drive revenue growth for both the year ending 31 January 2018 and future financial years.

 

The Board

 

There have been a number of Board changes during the last year.

 

On 31 August 2016 David Richards stepped down from the Board as Interim Non-Executive Chairman.  I was appointed as Non-Executive Chairman on 20 September 2016. 

 

On 30 December 2016 Claire Milverton assumed the role of Acting CEO, replacing Marcus Hanke. 

 

On 11 January 2017 Marcus Yeoman (Non-Executive Director) left the business and on 31 January 2017, Mike Sanderson retired from the business.

 

I've been acting as Executive Chairman since 1 January 2017 and on 13 March 2017 Nicole Payne was appointed to the Board as Finance Director having previously been the Group Financial Accountant.

 

The current leaner board now consists of myself, Claire Milverton, Nicole Payne and Nick Habgood.  We will look to strengthen the Board as and when necessary during the next financial year. 

 

Corporate governance

 

Following the changes to the Board, Nick Habgood is now Chairman of the Remuneration Committee and I am acting as Chairman of the Audit Committee and Nomination Committee.

 

 

 

Progress since January 2017

 

Since January, following the strategic review of the business, the new management team have put in place a three-phase programme:

Phase 1: Board restructuring

Phase 2: Management and operating structure

Phase 3: Rapid, focussed change programme

 

By and large, phase 1 and phase 2 are now complete with senior management appointed, strategy defined, a new operating structure to drive profitable, cash-generative revenue growth, and a considerable improvement in morale as a result of the Group's renewed focus. From a cost viewpoint we have sold loss-making businesses (£0.8m annualised run-rate saving), reduced costs (£2.5m on an annualised basis), taken exceptional non-recurring costs out (£1.3m cash cost in FY2017), in order to improve our run-rate and reduce cash burn. 

 

Through this process our bank has been very supportive, and has recently renewed our overdraft facility of £3m.

 

Looking forward

 

1Spatial is well-positioned in a very viable and interesting part of the market and has developed a unique patented technology that we now need to fully extend and exploit. We have a strong management team, which combined with our in-depth subject matter expertise and technology-led solutions and services, gives the business the opportunity to develop into a significant force in the market.

 

Early trading in Q1 2018 has been strong, and our workforce is fully informed, motivated and energised.  This financial year is focused on establishing a sound growth platform for the future, in order to fully maximise the opportunity presented by our technology and leverage the key partnerships that we are now fully engaged with.

 

I am confident that we are now well placed to grow a substantial, profitable and cash-generative business out into the future.

 

1Spatial people are approachable, smart, innovative and agile. As we look forward to future growth, I would like to take this opportunity to welcome those who have joined 1Spatial plc during the year and to thank everyone for their continuing hard work and dedication.

 

*Adjusted for strategic, integration, other one-off items and share-based payment charge 

 

 

 

 

Andy Roberts

Executive Chairman

 

 

Strategic report

 

CEO review

 

Overview of Group and key objectives

 

The year ended 31 January 2017 was a challenging year.  The financial performance of the business did not meet expectations set out at the start of the year and a trading update was issued to the market on 20 December 2016.

 

Following the Board changes at the end of 2016 and in January 2017 the Company has undertaken a full strategic review to develop a clear focus for the Group going forwards.   Following this review, I firmly believe that we have two great underlying businesses which can provide shareholder value over the long term being the Geospatial business of 1Spatial and the bespoke network managed service business of Enables IT. 

 

Elements of our previous investment proposition remain the same however under my leadership there will be a key focus on our core businesses, to maximise profitability by achieving revenue growth and managing costs through operational excellence. 

 

Following the strategic review the key objectives set for the Group are summarised below:

 

Focus on the two core businesses of Geospatial (1Spatial) and Cloud (Enables IT - network managed services)

 

During the year we reviewed the business, assessing the strengths of each component part, the market opportunity and our positioning. Given that assessment we took affirmative action, this included the disposal of Avisen UK Ltd and closure of Storage Fusion Ltd and subsequent to the year end we sold Enables IT Inc. (based in the US).  There are now two distinct core business units left in the company which have clear management structures and business objectives in place.  There is now laser focus within these two business units to operate efficiently and increase revenues.

 

Clear strategy and go to market plan

 

It's clear that the success of 1Spatial to the external market, our investors, our partners, and our employees needs a clear, consistent and focused strategy that runs through the business and channels. Previously the strategy didn't always align to needs of the market and channels to market. We have taken steps to re-address this and build upon key focus areas that have shown growth in key sectors such as utilities. Our strategy moving forward across the Group is to be a solutions provider, delivering our clients the best solution to address their organisation needs - where appropriate, using our unique patented software to solve complex geospatial data issues.  I've set out the detailed strategic statements for each business unit, later in my report.

 

Organisational structure align to strategy

 

Given the revised strategy, it is key that the appropriate organisation structure is in place to support this. The Board and the Company has now been restructured to align to this.  There are clear reporting structures in each business unit which provides accountability and ensures incentives are only paid on success. This restructuring has also had a positive effect on annual run rate costs of £2.5m.

 

Drive revenue growth

 

Understanding and delivering against the market needs and requirements

 

We have limited resources and therefore it is imperative that we have a full understanding of the market needs so we make the right investment decisions from both a go-to-market perspective as well as a software development perspective.  In the prior and previous years, there has been significant spend on development cost without having a full understanding of the potential market returns.

 

Going forward there will be an executive review process  for all development spend which will be measured against a return on investment model.

 

 

Maintain and increase revenues from existing customers - focus on customer satisfaction and grow share in existing client base

 

It's key that we maintain our support and maintenance revenues which equate to 40% of our January 2017 revenues for the year ended 31 January 2017.  We are committed to ensuring the best service is given to our clients and it is key to our integrator strategy where we become the client's 'go to' advisor.  Our customer support has always been a key USP for us and we need to continue to maintain these high standards while offering greater levels of support - such as 24hr support for mission critical applications - while working in partnership with key strategic customers to help them achieve organisational goals through the use of technology.  We are also undertaking key customer reviews to ensure our services align to their long-term strategy to increase stickiness in the account as well as drive incremental revenues.

 

              Increase revenues from new customers/opportunities - Growing market share

 

In prior years, most revenues in the group have been driven through existing customers and there has often been a dominance of one or two larger customers.  Whilst it is key that we maintain these customers we must look to de-risk this and increase revenues through new customer acquisition. 

 

For longer term growth and stability this is something we have been working to address over the last couple of years. We are now seeing the benefit of our focus on the utility market a couple of years ago and expect that this opportunity will continue to grow. It is key that we continue to value and grow our major accounts that have been with us for many years. Under our new strategy we will be assessing new markets to go for against a return on investment and market fit - both vertically and geographically.

 

Partner engagement to support our strategy

 

Aligning to the goals of maintaining and growing our major account clients and widening our market share to new markets, it's become very clear we need a focused strategy for partnering. Many of our key partners are working in the same accounts as us and for the clients and us there is strength in some cases of us coming together to deliver the best offering.  In the past we have had a very ad-hoc approach to partnering and limited focused effort. Within the geospatial business we have appointed a head of global partners who will work with the country managers to align partners to our strategy of being a spatial technology enabled solutions provider. To deliver the best solutions to meet the client's needs, having relationships with the relevant partners is key. Working with various types of partners will grow our addressable market and offerings. I will discuss the importance of partners and our key partner ESRI later in my report.

 

Have ambition and be innovative
 

We are an ambitious company and we truly believe we have some unique innovative software in our 1Integrate product which enables clients to cleanse, enhance and use complex and large Geospatial datasets.  We will continue to explore opportunities where we can scale the business with our 1Integrate product.   As we work more closely with partners and identify more 'use cases' for this technology through our integrator strategy we believe it will naturally open up more options. 

 

Drive the company to being cash generative and trade within our banking facilities

 

The company needs to be self-sufficient to fund future growth - this means it needs to be cash generative.  Given the restructure and the related cost savings and the focus on revenues we believe we can achieve this during the financial year to 31 January 2018.  We've had our £3m overdraft facility renewed so we can use this to manage working capital requirements on an ongoing basis.

 

Our two core businesses; 1Spatial - Geospatial and Enables IT

 

Focus on 1Spatial - Geospatial (FY17 Revenues - £15.1m)

 

What is Geospatial data?

 

Geospatial data is data that relates to location. This data is most obviously of interest to government departments and national mapping agencies; however, geospatial data has been growing in importance across many sectors, including: utilities, telecoms, emergency services, supply-chain and retail.

 

Typically, Geospatial Information Systems ("GIS") vendors focus on the front-end of their systems - on the user interface and analytical abilities. Many offer relatively simple data validation tools, but their focus is not on data management - the collection, validation, correction, maintenance, extraction, publication and interpretation of geospatial data.

 

That is 1Spatial's speciality. It is our heritage, our profession and our opportunity.

 

What does the Geospatial business in 1Spatial do?

 

1Spatial is a spatial technology enabled solutions provider creating innovative solutions to meet clients' evolving needs.

 

Cleansing, enhancing, using and successfully extracting strategic value from spatial data is a key focus.  1Spatial's goal is to drive major improvements in clients' operational efficiencies, customer satisfaction and enable them to realise significant new business opportunities.

 

1Spatial's people, with extensive industry knowledge, work in close collaboration with global clients to achieve their goals across sectors including government, utilities, defence and transportation.  

 

What is the size of the Geospatial market?

 

The Geospatial market is significant; a 2013 report by Oxera Consulting Ltd. on the economic impact of "geo services" estimated the total annual revenue generated by geospatial services was between US$150-US$270bn. and predicted to continue to grow at 11% CAGR during 2015 - 2020 (P&S Market Research http://www.prnewswire.com/news-release/global-geographic-information-system-gis-market-expected-to-grow-at-11-cagr-during-2015---2020-ps-market-research-567650721.html).

 

For many organisations, GIS is central to their ability to understand the geospatial component of their business. However, the success of this is wholly dependent on the quality of the underlying spatial data. The quality of spatial data is core to our business. 

 

There are sector-specific drivers as well. The utilities sector is increasing its focus on asset management; a considerable challenge in a sector with widely dispersed assets (pipelines, sewers, cables, sub-stations etc.) and historic records that are often incomplete and of uncertain quality.

 

We also believe there is an opportunity in the non-spatial market for our 1Integrate product and will look to review these opportunities during the year.

 

1Spatial's approach

 

Our approach is to ensure that the client has the best geospatial solution to support its business needs and aspirations.  We create these solutions through a number of different approaches:

 

•      Our team - with 1000's of man years of deep industry expertise and insight into the geospatial sector, we work closely with our clients' teams to assess, identify and provide solutions.

•     Our technology - unique software products and tools provide an automated approach to cleansing, enhancing and using spatial data which we deploy as part of client solutions

•      Our partners - from our extensive network of long-term partners, we provide the overall solutions for our clients.  Our partners include ESRI, Oracle, Safe Software, Latitude and HERE data. 

•       Our geographic reach - we have offices located in the UK, Ireland, USA, France, Belgium and Australia.

 

Our approach for FY18 and beyond

 

Following the restructuring and delayering process which has now been finalised, the Geospatial business unit is now in a good position to execute on the stated strategy above.  Key actions that have taken place subsequent to the restructuring are as follows:

 

Our team

 

A new senior management team has been put in place.  Each member has clear responsibility and accountability.  Key roles include:               

-       Chief Technology Officer

-       Country Managers/Country CEO's for each territory - UK/IRE, France/Belgium, USA and Australia

-       Chief Marketing and Partner officer

-       Heads for other key functions such as finance, HR and delivery

 

Our Technology

 

During the year we have continued to invest in the 1Spatial Management Suite (our end to end Spatial platform which includes the 1Integrate product) and our Elyx suite of products for utilities and cities in French speaking markets. The nature of 1Spatial's expertise means that our solutions are often found at the heart of complex installations, working alongside and inter-operating with the technology of other vendors. Making our technology 'Open' so that it can work with other vendors is key to our strategy for scalable revenue growth. 

 

As an industry trend we are seeing GIS growing outside of specialist geospatial organisations and therefore there is increasing demand for different solutions to work together ever more seamlessly. Again this is a reason why we have committed ourselves to provide software solutions that are 'Open' and which work well with key vendors in the field.

 

1Spatial's unique 1Integrate product which was patented in the US in January 2017 is key to our growth strategy - the product enables client's with large amounts of data (often in different formats) to bring the datasets together and cleanse and enhance those datasets to create an accurate dataset on which key decisions can be made. Unique points of the 1Integrate is the ability for the software to deal with complex and large datasets as well as being able to update specific feature changes in the database.   An example of this where this technology has been used is at Northumbrian Water and the State of Arizona (see customers section below). 

 

As noted above, the investment in our technology will be more aligned to customers' needs during FY18 with some investment in discrete development projects.  A key area that we will be reviewing during FY18 is the area of 3D. 

 

Following our ongoing market review as noted above, we will also focus on developing our 1Integrate product so that it can integrate with other platforms and technology such as some of the vendors of hand held device technology.   We will also be reviewing use cases for vertical alignment with our key sectors which include government, utilities, defence and transportation.  

 

Our Partners

 

ESRI*

1Integrate for ArcGIS was launched in the UK and US in January 2016, and in July 2016 at the International ESRI User Group in San Diego we announced availability of 1Integrate for ArcGIS mobility capability. 1Integrate for ArcGIS is built on the ESRI platform, which has millions of users globally and ESRI are the market leader in GIS (Geographic Information System). Our 1Integrate for ArcGIS solution can ensure compliance of data across the enterprise. The solution provides automated data validation and management for the ArcGIS platform and is now available across the delivering offerings, ArcGIS server, ArcGIS desktop and ESRI mobile applications such as collector, and Survey123 for ArcGIS. 

 

Sales for the year ended 31 January 2017 have been slow, we have spent the financial year targeting the market and growing awareness of the product and our partnership with ESRI. The focus has been on key markets such as the UK and the US, and we have attended key ESRI user conferences and carried out some joint marketing activity. We do however have some key customers using the product such as The State of Arizona in the US and Ordnance Survey Great Britain. 

 

* ESRI is a privately held US company and has a 43% share of the GIS market and around 350,000 organisations use its core ArcGIS software. This strategically important product makes 1Spatial's unique technology available directly from within the ESRI user interface. 1Integrate for ArcGIS opens up ESRI's customer base to 1Spatial.

 

HERE*

In January 2016, 1Spatial and HERE announced a strategic partnership. This was born out of a project at US Census where we partnered to provide automated integration and data quality to the HERE data sets which were enhancing the US Census data model. This project is still in place and we are working together. We have a number of other opportunities in the pipeline with HERE, allowing HERE to offer a more tailored version of their data sets through the use of 1Spatial technology in an automated and repeatable process. To date most of the opportunities have been in the US market but we are looking to expand this into European markets.

 

*HERE, previously known as Navteq, is a leader in the field of location intelligence, delivering precise and up-to-date maps and "location experiences" across multiple screens and operating systems. Drawing on more than 80,000 sources of data, HERE offers maps, voice guided navigation and live traffic information.

 

Our reseller revenues

 

Our clients will often require another vendor's technology as part of providing the client with the right solution for them. We currently distribute two vendors' software; FME from Safe Software and Geo-cortex from Latitude Geographics.  This represents 8% of our revenue in 2017 and we retain a 40% margin on these sales.

 

Our geographic reach

 

Key geographies are UK/Ireland, France/Belgium, the US and Australia.  As noted above, each has a Country manager/CEO with profit and loss responsibility.

 

As per our stated strategy in previous years, a key growth geography is the US.  We have a significant pipeline building in this geography however, the sales cycle time in this geography, particular in the Federal government, is long.  We anticipate that some of these larger deals which we are engaged on will start to close during the year ending 31 January 2018.

 

Subsequent to the year-end we took 100% control of our US operation.  

 

Our customers

 

As mentioned in this report, our customer strategy is focused on maintaining and growing a group of key large customers who have been with 1Spatial for many years, along with a focus on growing market share and client acquisition in selected vertical markets were we have expertise such as Utilities and Transportation.

 

With our focus on the Utility sector as an industry over the past couple of years we have seen good growth in this sector.

Below are key customer highlights for this financial year:

US Census Bureau - we continue to work with the US Census Bureau and they awarded us a further US$1.7m during the year which commenced delivery in September 2016.

AdV - The committee responsible for co-ordinating the surveying and mapping of Germany has been a customer of 1Spatial for many years and we recently worked with them on a major project. They had previously been working on a five-year production cycle for maps and this timeframe was no longer meeting the needs of the customers. 1Spatial worked with AdV to review the very complex requirements they had to get an automated solution that could run across states. Through innovation of the 1Spatial generalisation solution and ultimately automation there has been a 40% reduction in time to take the previous cycle from 5 years to 3 years.

 

Arizona Department of Transport (ADOT) - A new client for 1Spatial in the US, ADOT had been looking for ways to improve the way it responded to the demand for information from the Federal Highways Administration. Working with 1Spatial and through the use of the 1Integrate solution, ADOT have implemented an automated repeatable process to simplify and smooth the creation and maintenance of their state-wide road dataset. Automating the maintenance of the state-wide road network saves ADOT money, time and resources and makes the department more efficient. Importantly, this data can now been used to support innovation projects in the state.

 

Northumbrian Water - 1Spatial and Northumbrian Water innovative partnership to enhance response times for customers who experience problems with their sewer network in and around their properties. This was an outcome from when Northumbrian Water assumed responsibility for 13,500km of private drains and sewers under a government law change from property owners to water companies. However the problem Northumbrian Water faced was that only 5% of the network was mapped. Working in partnership with 1Spatial and using 1Spatial consultants and the 1Integrate solutions along with subject matter experts from Northumbrian, the mapping process was completed in 1/8 of the time originally planned and resulted in savings of £8.8m. This project has been short-listed for a number innovation awards in the IT and Utility sector.

 

Network Rail - 1Spatial were chosen to provide a web-based mapping and asset management solution for Network Rail. Network Rail are currently undertaking a five-year £330m transformation programme to improve its approaches to acquisition, storage and usage of asset information. As part of this project, 1Spatial has delivered a solution to visualise accurate, real time, asset information.

 

 

Focus on Enables IT - Network Managed Services (FY17 Revenues - £6.9m)

 

What does Enables IT do?

 

Enables IT is a technology enabled solutions provider which offers a tailored cloud, network and managed service solutions as well as a full suite of IT consultancy and project management solutions.  Revenue leverage is through its bespoke end-to-end manged IT offering to SMEs. 

 

Enables IT provides services mainly to the SME market but does have one very significant client in the healthcare sector and the business continue to be profitable and cash generative.  With its own  data centre , Enables IT offers public, private and hybrid cloud solutions with everything from  Backup-as-a-Service  through to managed  desktops .  Enables IT gives you on-demand access to best-in-class software, hardware and tools. It has an end-to-end IT capability that provides everything from  consultancy  and  project management  to the installation of physical infrastructure with a 24/7 service support desk.

 

Size of market

 

IT outsourcing and the provision of managed services in the UK is spread across a wide and fragmented market place.  Services are provided by a range of businesses including telecommunications, network operators, generalist IT providers, technology enabled solutions providers and more focused managed service providers.

 

Evolving business models have resulted in products and services being provided in four main forms (hardware/devices, software, datacentres/infrastructure and IT services) to three main customer types, government, large enterprises and SMEs.

 

Analysis by Gartner predicts that UK IT spend is forecast to exceed £117billion in 2019 - an increase of 10% from £106 billion in 2015.

 

Team, geography and customers

Enables IT is led by Managing Director Mike Wallis.  Mike founded Enables IT and has been with the business for over 25 years.  He is supported by General Manager Elizabeth Godding who in turn manages a skilled workforce of 33 at the head office based in Leatherhead.

 

The majority of Enables IT's clients are based in the UK with sector expertise across healthcare, legal services and education. 

 

Enables IT has long-term embedded customer relationships (5 years plus) generating 75% of its annual revenue.

 

Review of the Group for the year ended 31 January 2017

 

The last financial year to 31 January 2017 was very challenging and the revenues and adjusted EBITDA did not meet expectations.  The impact of this was an adjusted EBITDA loss in the period as well as cash outflows. We updated the market on 20 December 2016 to disclose reduced estimations and expectations of a marginal adjusted EBITDA loss due to a number of factors including contract timings and the decision to transition the business model to one of annualised revenues.

 

Since then a number of Board changes have taken place and the business has been restructured.  The Board believes the business is now on a stable platform and ready for growth.

 

Results

 

Overall, revenues increased on the prior year due to the inclusion of Enables IT for a full year, this was only for 6 months in the prior year.  1Spatial Inc.'s results have been included from February 2016 when the Group acquired control of the entity.

 

The Board focusses on adjusted EBITDA as a key KPI as it reflects the underlying performance of the business.  It is also a measure used by its broker and the rest of the financial markets including other brokers and analysts.

 

A summary of the continuing operations compared to the prior year are set out below.  The operations of Avisen UK, Storage Fusion and Enables IT Inc. are shown within discontinued operations. 

 

As at 31 January 2017 the Group had a secured order book of £5.0m (excluding support and maintenance).

 

	2017				2016
	Central costs £m	Geospatial £m	Cloud £m	Total £m	Central costs £m	Geospatial £m	Cloud £m	Total £m
Revenue	-	15.1	6.9	22.0	-	16.0	2.3	18.3
Cost of sales	-	(6.8)	(5.5)	(12.3)	-	(6.2)	(1.5)	(7.7)
Gross profit	-	8.3	1.4	9.7	-	9.8	0.8	10.6
Gross profit %		55%	20%	44%		61%	35%	58%
Admin expenses	(2.4)	(6.8)	(0.9)	(10.1)	(2.1)	(5.1)	(0.5)	(7.7)
Adjusted * EBITDA	(2.4)	1.5	0.5	(0.4)	(2.1)	4.7	0.3	2.9

                                               

Geospatial

 

GIS Solutions delivers 69% of the Group's revenue and represents the core strategic focus of the business; the provision of software and services for the management of geospatial data. The division is underpinned by a number of recurring revenue contracts from large customers with well-established relationships including a US$1.7m extension contract with the US Census Bureau.

 

The overall revenues were down by 5% but on a like-for-like basis when 1Spatial Inc. is included (t was included for 11 months in 2017 but not in 2016) the revenues are down by 20%.

 

The split of the £15.1m revenue is as follows:

 

	2017		2016
	£m		£m
Licences - own	0.6	4%	1.7	11%
Licences - third party	0.9	6%	1.0	6%
Services	6.6	43%	6.8	42%
Support and maintenance (S&M) - own	6.2	41%	5.8	36%
Support and maintenance (S&M) - third party	0.8	6%	0.7	5%
	15.1		16.0

 

Key reasons for revenues being down on the prior year are the reduction in licences and services sold in the year, mainly due to a lack of focus and execution (as noted in my review above) coupled with long sales cycles and some changes to the business model in terms of annual licensing.

 

Support and maintenance revenues still remain strong - we have approximately 330 customers on support and maintenance.

 

The gross profit % was down on the prior year from 61% to 55% as a result of the change in the product mix (licences are higher margin).

 

Costs have increased during the year ended 31 January 2017 due to the addition of the US operations.

 

Overall, the adjusted EBITDA trading results for the Geospatial division were disappointing - driven by a lack of revenue and too much cost, which was addressed and reduced in January 2017.

 

Enables IT

 

Cloud Services (representing 31% of revenue) provides important capabilities including hosting for cloud services, managed services, network services, 24/7 support, storage management, project management expertise and business intelligence solutions.  We have approximately 130 customers on recurring revenue streams (support and maintenance).

 

The 2016 revenues include only six months of Enables IT.

 

	2017		2016
	£m		£m
Services	1.3	19%	0.5	23%
Support and maintenance (S&M)	1.6	24%	0.9	39%
Products	4.0	57%	0.9	38%
	6.9		2.3

 

The gross profit % was down on the prior year from 35% to 20% as a result of the change in the product mix.

 

Administrative expenses were broadly in line with the prior year but as a result of the lower gross margin, adjusted EBITDA on an annualised basis was slightly behind the prior financial period.

 

Central costs

 

Central costs were higher than the previous year due to increased travel costs and professional fees.
 

Overall result for the year

 

	2017	2016
	£m	£m
Adjusted* EBITDA (loss)/profit	(0.4)	2.9
Depreciation	(0.5)	(0.4)
Amortisation and impairment of intangible assets	(11.4)	(1.1)
Share-based payment charge	(0.6)	(1.0)
Strategic, integration and other one-off items	(2.6)	(1.1)
Operating loss	(15.5)	(0.7)
Net finance cost	-	-
Share of associates' results	(0.3)	(0.4)
Loss before tax	(15.8)	(1.1)
Tax	1.0	0.5
Loss for the year - continuing operations	(14.8)	(0.6)
(Loss)/profit for the year - discontinued operations	(3.5)	0.6
Result for the year	(18.3)	-

 

* Adjusted EBITDA is stated net of certain strategic, integration, other one-off costs and share option charge.  See note 3 to the Accounts for further information.

 

 

Amortisation and impairment of intangible assets

 

The most significant line item in the classifications below adjusted EBITDA is the amortisation and impairment of intangible assets.  Given the loss-making adjusted EBITDA in the period and the significant cash outflow in the period from operations (including the R&D cost) it was prudent for the Board to undertake an impairment review on a realistic and prudent basis. 

 

Given this review, the total impairment was £11.2m, £9.4m of which relates to continuing operations.

 

Share-based payment charge

 

The share option charge represents the 'non-cash' charge under IFRS 2 attributable to issuing share options this financial year. The decrease in this charge is due to the effect of leavers in the year.

 

Strategic, integration and other one-off items

 

 

	2017 £m	2016 £m
Costs associated with corporate transactions and other strategic costs	0.2	0.6
Integration costs associated with Enables IT and 1Spatial Inc. business	0.1	0.1
Loss-making contract release in Belgium	-	(0.2)
Defined benefit pension provision in France	-	0.5
Loss on sale of building in Belgium	-	0.3
System development costs	0.1	-
Restructuring and redundancy costs	0.9	0.1
Provision for amounts receivable from Sitemap Ltd	1.3	-
Release of liability for sales tax exposure	-	(0.4)
Other	-	0.1
Total	2.6	1.1

 

Given the recent acquisitive nature of the business, the Group incurs one-off costs which impact the overall underlying results of the business.  Where possible the Group seeks to separate these out along with any other one-off items which the Board believe should be shown separately in this category. 

 

A summary of key transactions within this category, are set out above with further details provided in note 3.  The overall figure has increased compared to the prior year with the majority of the increase stemming from the £1.3m provision for amounts receivable from its associate company, Sitemap Ltd which were of a funding nature.  The other significant increase is the cost of restructuring and redundancy, mainly due to Board of Director changes.

 

Tax

 

The tax credit for the Group is £1.0m (2016: £0.5m). This is a largely a result of the deferred tax impact on the significant impairments in the year.

 

Loss for the year from discontinued operations

 

The losses for the year from discontinued operations relates to the sale of Avisen, the closure of Storage Fusion and the sale of Enables IT Inc.  The Enables IT Inc. (US) business was sold after the year end but was classified as discontinued given that the Board had made a decision to sell this prior to the year end.

 

Statement of financial position

 

The Group's statement of financial position at 31 January 2017 is significantly decreased on the prior year, with net assets of £9.2m - down from £25.7m at 31 January 2016. 

 

Non-current assets

 

Intangible assets including goodwill

 

Goodwill and intangible assets decreased by £6.9m in the year.  Goodwill and intangibles balances of £0.9m were reclassified to the statement of financial position category of 'Assets of disposal group classified as held for sale' and impaired in that statement of financial position category, and within the loss from discontinued operations.  Significant impairment charges of £10.2m were booked against both goodwill and intangible asset balances, £9.4m of which relates to continuing operations and the balance of £0.8m to discontinued operations Avisen UK Limited and Storage Fusion Limited.

 

Property, plant and equipment

 

This decrease of £0.6m in the year is mainly as a result of including the property, plant and equipment of Enables IT Inc. (£0.6m) within the separate statement of financial position total of 'Assets of disposal group classified as held for sale'.

 

Interests in associates

 

This represents the interest in Sitemap Ltd, as well as the interest in 1Spatial Inc. up to February 2016, before the Group acquired a controlling interest.  The decrease in the year is a result of equity-accounting the associates' losses in the year.

 

Current assets

 

Trade and other receivables

 

Trade and other receivables were £8.9m, a decrease of £1.9m on the prior year balance of £10.8m. One of the main reasons for this is the balances attributable to discontinued operations that at the current year end are either sold (Avisen UK Limited), dormant (Storage Fusion Limited) or otherwise reclassified as held for sale (Enables IT Inc.) which make up £1m in the prior year. The remaining decrease comes from the provision for all amounts due from Sitemap Ltd in the current year (£0.4m due from Sitemap Ltd last year) and a decrease in trade receivables of £1.5m which is offset by an increase in trade and other receivables of £0.7m due to the inclusion of 1Spatial Inc.'s current assets in the year, on gaining control of this company.

 

Cash balance

 

Net funds reduced from £5.0m in the prior year to £0.6m, after gross proceeds from a share issue of £0.9m.  The analysis of this is discussed in the cash flow section below.

 

Assets and liabilities of disposal group classified as held for sale

 

In accordance with IFRS 5, the assets and liabilities of Enables IT Inc. (which was identified as a disposal group held for sale) were written down to their fair value less costs to sell of £0.1m.

 

Current liabilities

 

Trade and other payables were £12.1m, an increase of £1.4m on the prior year balance of £10.7m. On a like-for-like basis, trade and other payables increased by £1.2m and the inclusion of 1Spatial Inc.'s current liabilities in the year has contributed a further £0.4m to the increase. The impact of discontinued operations that are not included in the current year balances offsets these increases with £0.7m.

 

Non-current liabilities

 

The decrease of £0.7m in the deferred tax liability is mainly attributable to the impact of the impairments in the year referred to in the Tax section above.

 

Share capital and reserves

 

Share capital and share premium increased by £0.9m in the year after the share placing in June 2016. Accumulated losses increased £18.5m, mainly as a result of the significant impairments of goodwill and intangible balances noted above.

Cash flow

 

The year end cash and cash equivalents position was £1.3m (2016: £5.0m).   The Group had net funds of £0.6m (2016: £5.0m).

 

A cash flow bridge is presented below which reconciles the adjusted* EBITDA to the year end cash balance. 

                   

	2017
	£m
Adjusted* EBITDA loss - continuing operations	(0.4)
Adjusted* EBITDA loss - discontinued operations	(1.6)
Exceptional items (paid)	(1.0)
Purchase of property, plant and equipment	(0.6)
Expenditure on product development and intellectual property capitalised	(3.6)
Working capital movements	1.6
Acquisition of 1Spatial Inc. (net of cash acquired)	(0.9)
Increase in borrowings (overdraft)	0.7
Issue of shares	0.9
Effect of forex	0.5
Net cash outflow	(4.4)
Opening net funds	5.0
Closing net funds	0.6

 

* Adjusted EBITDA is stated net of certain strategic, integration, other one-off costs and share option charge.  See note 3 to the Accounts for further information

 

Whilst there was a net cash outflow in the period, the above summary details some of the key cash outflows which are strategically important for the Group including the acquisition of 1Spatial Inc. and the investment in the R&D activities. From a trading perspective the main cash outflow was the payment of exceptional costs which includes restructuring and redundancy costs of £0.7m to streamline the business.

 

The Company was pleased to secure funds from the placing in June 2016 and which strengthened the cash position together with the overdraft facility.

 

1Spatial Inc. (previously LSI)

 

In February 2016, the Group exercised its option to acquire a further 26% of 1Spatial Inc. for the sum of US$1.3m (£0.9m). The Group funded this acquisition through a small fund raise of £0.9m.  This brought 1Spatial plc's total holding in 1Spatial Inc. to 73%.  Subsequent to the year end, in April 2017, the Group exercised its final option to acquire the remaining 27% for US$0.9m (£0.7m) through the issue of shares, taking its ownership to 100%.  This acquisition positions us to achieve our strategic goals across the Group.  The US is an area of main focus for growth and we continue to work alongside key customers and partners such as US Census and ESRI to achieve progress in this region.

 

Sitemap

In April 2017, 1Spatial acquired the 51% of Sitemap Ltd that it did not already own for £0.2m through the issue of shares. The Company's investment in Sitemap to date has funded the development of a solution which locates and visualises sites which best fit commercial and residential property developer needs. The offering is still under development with market analysis, research and business development opportunities being reviewed.

With the final increase in our interests of 1Spatial Inc. and Sitemap Ltd to 100%, we now have full control of the strategic direction of all companies across the Group and a clear roadmap to drive profitable growth.

 

Outlook

 

Following a challenging year, we are pleased to now be in a position of stability with a clear path to growth. 

 

We will continue to drive long-term shareholder value by executing on our strategy to be a technology enabled solutions provider investing in our people, technology and relationships with partners and exploiting the opportunities across geographic markets particularly in the US. 

 

We have made an encouraging start to the year and have seen some new opportunities close in the first quarter which has added to our growing number of opportunities .We look forward to a year of progress and are positioned well to achieve our strategic goals and drive profitable growth.

 

 

 

 

 

 

 

 

Consolidated statement of comprehensive income

For the year ended 31 January 2017

	Note	2017 £'000	2016 £'000
Continuing operations
Revenue	2	22,065	18,262
Cost of sales		(12,386)	(7,677)
Gross profit		9,679	10,585
Administrative expenses		(25,129)	(11,258)
		(15,450)	(673)
Adjusted* EBITDA		(407)	2,902
Less: depreciation		(452)	(362)
Less: amortisation and impairment of intangible assets	5	(11,408)	(1,156)
Less: share-based payment charge		(566)	(976)
Less: strategic, integration and other one-off items	3	(2,617)	(1,081)
Operating loss		(15,450)	(673)
Finance income		176	74
Finance costs		(208)	(101)
Net finance cost		(32)	(27)
Share of net loss of associates accounted for using the equity method	6	(266)	(421)
Loss before tax		(15,748)	(1,121)
Income tax credit	4	988	503
Loss for the year from continuing operations		(14,760)	(618)
Discontinued operations
(Loss)/profit for the year from discontinued operations (attributable to equity holders of the company)	9	(3,542)	630
(Loss)/profit for the year attributable to:
Equity shareholders of the Parent		(18,423)	12
Non-controlling interest		121	-
		(18,302)	12
Other comprehensive income/(loss)
Items that may subsequently be reclassified to profit or loss:
Actuarial (losses)/gains arising on defined benefit pension, net of tax		(36)	56
Exchange differences arising on translation of net assets of foreign operations		281	(140)
Other comprehensive profit/(loss) for the year, net of tax		245	(84)
Total comprehensive loss for the year		(18,057)	(72)
Total comprehensive loss attributable to:
Equity shareholders of the Parent		(18,169)	(72)
Non-controlling interest		112	-
		(18,057)	(72)
Total comprehensive loss attributable to equity
shareholders of the Parent arises from:
-       Continuing operations		(14,258)	(515)
-       Discontinued operations		(3,799)	443
		(18,057)	(72)

 

 

 

	Note	2017 £'000	2016 £'000
(Loss)/earnings per ordinary share from continuing and discontinued operations attributable to the owners of the parent during the year (expressed in pence per ordinary share):
Basic (loss)/earnings per share		(2.53)	0.00
From continuing operations	15	(2.04)	(0.09)
From discontinued operations	15	(0.49)	0.09
Diluted (loss)/earnings per share		(2.53)	0.00
From continuing operations	15	(2.04)	(0.09)
From discontinued operations	15	(0.49)	0.09
* Adjusted for strategic, integration, other one-off items (note 3) and share-based payment charge.

 

 

 

                                                                                                Registered company number (England): 5429800

Consolidated statement of financial position                                              

As at 31 January 2017

                                                                                                                                                                 *Restated

	Note	2017 £'000	2016 £'000
Assets
Non-current assets
Intangible assets including goodwill	5	11,968	18,900
Property, plant and equipment		1,057	1,638
Interests in associates	6	-	1,577
Total non-current assets		13,025	22,115
Current assets
Trade and other receivables	7	8,929	10,815
Current income tax receivable		-	391
Cash and cash equivalents	8	1,285	4,996
Total current assets		10,214	16,202
Assets of disposal group classified as held for sale	9	547	-
Total assets		23,786	38,317
Liabilities
Current liabilities
Bank borrowings		(681)	-
Trade and other payables	10	(12,072)	(10,686)
Current income tax liabilities		(23)	-
Obligations under finance leases		(11)	-
Provisions	11	(242)	(385)
Total current liabilities		(13,029)	(11,071)
Non-current liabilities
Obligations under finance leases		(53)	-
Defined benefit pension obligation		(614)	(457)
Deferred tax	12	(421)	(1,122)
Total non-current liabilities		(1,088)	(1,579)
Liabilities of disposal group classified as held for sale	9	(447)	-
Total liabilities		(14,564)	(12,650)
Net assets		9,222	25,667
Share capital and reserves
Share capital	13	16,449	16,223
Share premium account	13	22,931	22,264
Own shares held	13	(303)	(306)
Equity-settled employee benefits reserve	13	3,254	2,688
Merger reserve	13	15,347	15,347
Reverse acquisition reserve	13	(11,584)	(11,584)
Currency translation reserve	13	(142)	(432)
Accumulated losses		(36,992)	(18,533)
Total equity attributable to shareholders of the parent		8,960	25,667
Non-controlling interests		262	-
Total equity		9,222	25,667

* During the course of the integration of the Enables IT group, additional loss-making contract provisions were identified as being required on acquisition.  As these were identified within 12 months of the acquisition, they have been reflected as fair value adjustments at acquisition in accordance with IFRS 3, 'Business combinations'. The adjustment has been to increase goodwill and provisions by £41,000.