Rosslyn Data Tech. - Audited Results for the year ended 30 April 2020

22 September 2020

Rosslyn Data Technologies plc
("Rosslyn", the "Group" or the "Company")

Audited Results
For the year ended 30 April 2020

Rosslyn Data Technologies plc (AIM: RDT), the provider of a leading cloud-based enterprise data analytics platform, is pleased to announce its audited results for the year ended 30 April 2020.

Financial Summary

·    Annual Recurring Revenue increased 16.7% to £6.3m (2019: £5.4m).

·    Revenue growth of 2.1% to £7.1m (2019: £7.0m), as growth was offset by the planned reduction of more than £0.6m of low margin contracts.  This helped gross margin increase to 84.7% (2019: 79.7%).

·    Administrative operating expenses controlled tightly at £6.0m (2019: £6.0m).

·    Operating EBITDA (excluding share-based payment costs) profit of £36,000 (2019: loss of £432,000); the first positive EBITDA in the Company's history.

·    Loss before tax of £1.90 million (2019: £1.70 million) due to higher level of amortisation of intangible assets.

·    Cash balance at the year-end of £0.8m (2019: £2.0m), boosted after the year end by a placing which raised £6.8m (net of expenses).

·    The undrawn £0.5m of the £1.5m term loan facility from Clydesdale Bank was drawn down. Loan note and bank debt repayments of £0.9m (2019: £0.4m) were made during the year, leaving gross bank debt of £1.2m at the year end.

Operational Highlights

·    Significant new client wins including a global manufacturer and distributor of superior building materials and products, a multinational general insurance company with operations in more than 140 countries, and a science-led sustainable technologies business employing 15,000 people.

·    Product development has continued; integrating supplier onboarding functionality and creating master data management functionality for use by large enterprises.

·    Acquisition of Langdon Systems, adding duty and import/export data capabilities and a strong client base to the business.

Outlook

·    Since the start of lockdown, COVID-19 has resulted in a higher level of engagement by our clients, but sales opportunities were temporarily delayed during lockdown. In recent weeks we have started to see increased activity in the form on RFPs and RFIs from prospective clients, and our revenues and pipeline remain strong.

·    The focus by large companies on supply chain resilience, supply chain risk, cost reduction, extracting value from "Big Data", and the imminent end of the Brexit transition period are positive factors for Rosslyn.

·    With the placing proceeds the Group is now in a position to accelerate revenue growth, by investing further into Sales and Marketing, and post period end numerous appointments have been made including Paul Watts joining as Chief Customer Officer.

Rosslyn Chief Executive Officer, Roger Bullen said;

"We are entering an exciting phase of investment for the Group with a strong, growing product set and a reinvigorated Sales and Marketing team. This will allow us to develop stronger partnerships with new and existing clients, adding greater value to their Procurement functions, and ultimately driving the Group to sustainable profitability."

Notes to Editors

Rosslyn Data Technologies plc, (AIM: RDT) is a leading provider of a cloud-based big-data analytics platform. The company provides analytical services by combining four key technologies: bulk data extraction; cleansing; enrichment; and visualisation, through a single cloud platform enabling users with detailed data to make more informed decisions. Rosslyn's RAPid platform is the Group's primary product available to its multinational customers. Further information can also be found on the Company's website at:   www.rosslyndatatech.com

Chairman's statement

I am pleased to say that this has been a year of solid progress.

The Company strategy is to deliver strong organic growth in our core capabilities, to expand our product capability along the supply chain, and to build our capabilities further via acquisition. During the year we have considerably evolved the board to help deliver on this strategy.

Ash Mehta joined the board as Chief Financial Officer in April 2019 and brings significant experience in commercial finance roles at multinational and growth companies; in particular his experience of fundraising in public markets, and of acquisitions, has been invaluable during a year where we have done both.

Ginny Warr joined the board as an independent non-executive director in May 2019; her experience as Chief Procurement Officer at British Land has brought significant domain expertise in supply chain and procurement management to the board. This has been very useful as we expand and reposition our procurement and supply chain offerings.

Since year end Paul Watts has joined the board as Chief Customer Officer. Paul's experience and track record of delivering fast growth at software businesses is critical to our cornerstone strategy of driving organic growth; we believe that this appointment will, in time, drive not only revenue growth but also increased profitability.

We have also seen some board departures and I would like to thank again co-founder Charles Clark whose passion and drive helped get the Company to where it is today; Charles stood down as a director in October 2019 and left the business in March 2020, and has moved on to new opportunities. I would also like to thank my predecessor John O'Hara for his tireless efforts in steering the Company during his five-year tenure; John moved from Chairman to Non-Executive Director and after a transition period stood down from the board in June 2019 to focus on his executive role. The board wish both John and Charles the very best.

There have been two important events this year. Firstly, the acquisition of the assets of Langdon Systems which provides duty management systems, has added both revenue and ARR, but also showed again the capability of the Company to acquire and rapidly integrate businesses. Secondly, the fundraising via a placement in May 2020 which raised £6.8m net of costs and which positions us strongly to take advantage of market situations. This fundraising was completed at a very fast pace during COVID lockdown and it is testimony to the drive and capabilities of the executive leadership team; I would like to thank Roger, Ash and Hugh for making this happen.

Financially, we were pleased to report a significant increase in Annual Recurring Revenue, and a positive operating EBITDA (excluding share-based payments) for the first time in the Company's history. We have continued to win new blue-chip clients and to evolve our core RAPid product line into a complete Supplier Master Data Management Solution, and have seen the first sale of our Supplier Information Management module.

The one cloud of uncertainty is COVID-19, and whilst some clients continue unaffected, there has understandably been a slow-down in new clients signing up to our services.

Nevertheless, we are well positioned for growth. A strong leadership team, high quality and highly relevant product set, and strong financial position enable us to take advantage of market opportunities.

Chief Executive's statement

I'm delighted to provide a review of our progress during 2019/20; a year of considerable change.

Whilst planning for the year it had become increasingly clear to me that the data analytics sector whilst remaining attractive, was entering a period of significant change, bringing both challenges and opportunities for Rosslyn. In addition, despite improved delivery in recent years, it was also clear that there were several areas where the Company needed to be strengthened, which is why, in April last year we looked at what we needed to do in order to get us into a position of growth.

Three priorities became very clear, technical and product innovation, sales performance and employee engagement. Identifying these three priorities enabled us to focus on particular areas we could address and improve. These priorities provided us with the ability to respond more effectively to our operational challenges. These priorities do not stop, they continue and over time will change the culture of the firm. Ultimately, they will lead to us delivering widespread improvements and better returns for customers, shareholders and stakeholders over both the short and longer term.

Firstly, we took steps to improve the constitution of the sales and marketing teams as well as adding a full time CFO, Ash Mehta. Finding the right candidate to manage our sales and marketing processes took longer than anticipated but I am now delighted that we have Paul Watts on board with his experience in sourcing/procurement solutions and Robotic Process Automation adding considerable knowledge to the team. These additions have helped and will continue to help considerably in building our foundation for the future.

2019 Performance

Group revenues grew slightly to £7.1 million, despite removing more than £0.6 million of low-margin contracts which were proving to be a burden on the overall cost base. This removal increased the gross margin to almost 85%, and enabled us to reduce our headcount further to the 63 FTEs required to meet the needs of the business while enabling us to keep our Administration costs stable despite adding seven staff through the acquisition of Langdon.

By making the most of our own technologies to deliver efficiencies in servicing our clients and by ensuring that our cash resources were used efficiently and wisely we were able to deliver a positive operating EBITDA (excluding share based payments) for the first time in the Company's history.

Our other core KPIs of ARR and Backlog (new for 2019/20) have also been increasing with ARR growing by more than 16% to £6.3 million, and Backlog increasing by 26% also to £6.3 million. Backlog is what some businesses would call the order book ie. the value of contracts signed but with revenue yet to be recognised in the Income statement. The acquisition of Langdon Systems during the year had a positive impact on the business and added to the ARR growth. The significant change in ARR from our starting position of £5.4 million shows the commitment and focus of the Company and in which we hold this measure. Our churn rate remains low, less than 10%, but we continue to strive to reduce this, aided by the fact that our full suite of products is designed to be integrated into the operating systems of our clients, making it more embedded into our clients activities than in our past, and thereby adding greater value to clients.

Cashflow, as always, was a critical area of focus for us, becoming more demanding when the global pandemic hit us in March this year. Fortunately, we were able to address this head on and through our clients and relationships we were able to assist our clients in managing their supply chain, ensuring that they could meet the needs and objectives of their respective organisations.  At the year end our cash position was £0.8 million, and at the end of August the balance was £7.0 million following our successful fundraising after the period end.

Pipeline

Technical innovation has been a driver for us over the last three years and this year we delivered on our promises, having released two new products to our suite. The new products we have introduced, Supplier Information Management and Supplier Master Data Management have been designed to meet the changes we are seeing in the market place, addressing the issues our clients have been facing and struggling to overcome.  These products both utilise our RAPid platform and integrate many of the tools acquired from the Integritie acquisition in 2017.

With data analytics becoming a high priority in many firms, the ability to create that high quality, accurate, single version of the truth, a "Golden Record", and then share this record across the entire organisation is becoming essential. Our technology, our processes and our products allow this to happen as frequently as our clients require, in near real time with as little human intervention as possible, often with zero human intervention.

Our solution brings together the skills built over the last two decades of handling both structured and unstructured data, and in developing algorithms and technologies that maximise the benefits that can be derived from a SaaS platform. Reducing the total cost of ownership, providing operational gearing and providing real time analytical capabilities as well as ensuring that "Golden Record" is updated, is kept pure and is owned by the entire organisation.

In addition, the Duty Management System solution (DMS) that we now operate following the acquisition of Langdon Systems in September last year, will undoubtedly have an impact on the supply chain function. Even if duty rates are minimal or zero across the European region the amount of bureaucracy and record keeping required will increase significantly. With the end of the transition period of Brexit now only a few months away we are seeing a considerable uptick in the number of clients requiring solutions capable of managing their import and export requirements.  Again, the DMS solution is now sitting on the RAPid platform and can be delivered quickly and efficiently, with new products being planned over the next quarters as changes in Customs procedures develop.

Outlook

Having achieved a positive EBITDA, and now looking forward to the next twelve months and beyond, we are keen to drive forward utilising our skills and strategy to deliver sustainable organic growth, backed up and supported by further strategic acquisitions that will either enhance our technology or add to our revenues. 

Following a successful fundraising of £6.8 million (net) after the year end, we will invest in our revenue growth, our product line and improve the user interface of our products. In the last two months we have more than doubled the size of our sales force, increased the amount invested in Marketing and appointed a Chief Customer Officer, Paul Watts, to manage and develop the team and maximise the opportunities that exist for us. Paul brings with him more than 25 years' experience in the technology sector, most recently in SaaS procurement and RPA, again emphasizing the point of focusing on our strategy, hiring the right people to do the best job.

Despite COVID-19 the demand for our core products continues to grow and our healthy pipeline demonstrates that we are on the right path. Innovation and improvements in the product will continue to generate interest and I believe will enable us to have a successful 2020/21. If anything the impact of COVID-19 on the business has been to highlight the importance of data quality and accessibility and its relevance in determining the risk in and the resilience of the supply chain. This coupled with multinationals' needs to cut costs during this period puts us in a strong position.

More clients are now discussing the criticality of improving the underlying data that is used by our Spend Analytics solution. Extracting value from the "Big Data" spread around their systems is becoming more important for large companies and we see this as extremely positive as it will enable us to interact with the heart of most organisations' ERP and finance systems. With our capability to read and write to and from these ERP systems to the RAPid platform we would expect our average client lifecycle to increase and our already low churn rate to decrease further.

On a separate note, having acquired Langdon Systems we are keen to seek out opportunities for small bolt-on acquisitions that form part of our strategic road-map and that can be enhancing to our financial performance in a relatively short timeframe. Our ability to integrate acquisitions whilst retaining key clients, revenues and staff demonstrates our capabilities and we would expect this to lead to improved gross margins and reduced overheads.

People

Our ambition is to drive a high-performance culture, putting innovation at the heart, remaining true to our values and our purpose: to help organisations do more, achieve more and deliver long term sustainable benefits from using our technology. Our commitment to our customers, our economic and social environment and our people will continue. 

We understand that our people and their commitment are fundamental parts of Rosslyn's success, future and culture. Having a clear strategy and direction of travel alongside having and hiring the right people, hungry for success, enthused, energetic and capable of delivering that commitment means we are on the right path.

Without the dedication of this great Rosslyn team we would not be able to deliver the levels of skill, expertise and technology demanded by our clients. Ensuring this team is fully engaged understands the goals of the firm and what we are setting out to do is essential to our future success.

During the year, to ensure we were on the correct path, we conducted a new employee survey and during the COVID-19 pandemic we have been taking regular "pulse" surveys, ensuring that we are staying aligned to our commitments and priorities, continuing along the path of openness and integrity. As such I was pleased to see a meaningful improvement in employee engagement scores, which are an important driver of performance. Communication and sharing of the objectives and goals of the firm have been instrumental in developing our culture. A heart felt thank you to the team for all their efforts and commitments to the development and growth of Rosslyn.

Chief Financial Officer's Report

This last year has been a pivotal one for the Group. The EBITDA losses which we have been reducing over the least two years were finally stemmed, and the Group is reporting a positive EBITDA for the first time in its history.

We regard this as a significant turning point and with the fundraising which completed in late May, after the year end, we have the balance sheet to proceed into our next stage of growth to increasing revenues and EBITDA over the long run. This means investment into sales and marketing, and we have already increased our headcount in this department. There is always a lead time between salespeople being added and starting to deliver sales, and during the period of COVID-19 there remains a high degree of uncertainty on new client wins, so the payback from new salespeople may take longer than ordinarily expected but we know this is crucial for the growth of the Company.

Profit and loss account

Revenue for the year grew 2.1% to £7.1 million (2019: £7.0 million). This was comprised of an increase of 12.7% from our acquisition of Langdon Systems, and a 10.6% fall in underlying revenue. This fall was due to the fact that we terminated client contracts which were very low margin pass-through third-party license business and where we could not secure a sufficient price increase. This had a positive impact on gross margin as well as allowing us to reduce headcount costs of staff who had been supporting those clients.

The gross margin percentage increased to 84.7% (2019: 79.7%). This was partly due to removal of the low margin contracts mentioned above. It was also due to our ongoing work to reduce our cloud storage and processing costs through more efficient utilisation of this resource.

Administrative costs were held stable at £6.0 million despite the addition of seven staff from the Langdon acquisition. With our focus on internal efficiency through process improvements and Robotic Process Automation, we were able to remove a similar number of headcount whilst still maintaining high levels of client service.

The increase in gross margin percentage coupled with Administrative expenses being held stable has resulted in an EBITDA (excluding share-based costs) profit of £36,000 (2019: loss of £432,000). Whilst this is a small number it is very significant for the Group as a milestone to future growth of EBITDA which remains a key metric not just in its own right but as a proxy measure for cash generation in the business.

We continue to invest significantly into research and development for our product range. During the year the Group spent £1.3 million (2019: £0.9 million) on tax relief qualifying research and development on projects such as producing the supplier onboarding module for our RAPid suite, and creating a Duty Management System which integrates with the new HMRC reporting tool, CDS. The Group's policy is to fully expense these costs as they are incurred and excluding this investment EBITDA would have been a profit of £1.3 million (2019: profit of £0.5 million). The Group makes full use of the government's R&D Tax Credit scheme and during the year we received £310,000 relating to 2019 and expect to receive £247,000 relating to 2020.

The loss before income tax for the year was £1.90 million (2019: £1.70 million). This includes the impact of £1.7 million (2019: £1.0 million) of amortisation of intangible assets arising from the Integritie acquisition in 2017 and the Langdon acquisition in 2019, a share-based payment charge of £69,000 (2019: £125,000) and the depreciation of right-of-use assets of £40,000 (2019: £nil).

Cash flow and funds

Excluding bank debt, the cash balance at the year-end was £0.8 million (2019: £2.0 million). During the year we drew down the remaining £0.5 million from our £1.5 million term loan facility with Clydesdale Bank. Loan repayments during the year were £905,000 comprised of £632,000 of loan notes repaid in May 2019 and term loan repayments of £273,000.

Cash flow from operating activities was a use of £706,000 (2019: cash generated of £850,000). A large part of this was due to the reversal of favourable cash flow items which existed at the start of the year .

Net debt at the year-end stood at £0.4 million (2019: net cash £0.4 million). Since the year end, we have raised £6.8 million (net of expenses) through a placing with new and existing investors at a premium to the market price at the time, and in which the directors invested in aggregate a total of £171,000. This was raised in order to;

·    Increase sales and marketing effort to accelerate growth, including building the pipeline in Supplier Master Data Management (SMDM)

·    Maintain investment into product development

·    Strengthen the balance sheet to protect against possible coronavirus impact

·    Invest in small, opportunistic bolt-on acquisitions.

Balance sheet

The major movements in the balance sheet during the year were;

·    the intangible assets reducing to £2.0 million (2019: £2.9 million) as the assets recognised on previous acquisitions are written down in accordance with our accounting policy.

·    the repayment of debt, as described above.

·    the reduction in cash due to working capital movements and debt repayments as described above.

Key metrics

The Group regards Revenue and Operating EBITDA to be key financial metrics for the business along with ARR and Backlog.

Annual Recurring Revenue grew by 17% to £6.3 million (2019: £5.4 million), driven partly by the acquisition of Langdon and partly by new client wins. The low margin contracts we removed during the year were a drag on the growth of ARR.

The Backlog grew 26% to £6.3 million (2019: £5.0 million), as a result of the Langdon acquisition, new client wins but also due to clients extending their contract lengths upon renewal.

Acquisition of Langdon Systems

During the year we acquired the IP, software, assets, client list and associated contracts of Langdon Systems Ltd, for a consideration of £49,000. The acquisition was integrated rapidly, and we managed to secure the majority of clients, many of whom have since renewed their contracts.

IFRS16

This new standard addresses the accounting for leases and requires lessees to recognise all leases on their balance sheet with limited exemptions. This results in the recognition of a right-of-use asset and corresponding liability on the balance sheet, with the associated depreciation and interest expense being recorded in the income statement over the lease period. The impact on the Group's results was minimal.

Financial results

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Reconciliation of loss before income tax to cash used in operations

Notes to the consolidated financial statements

1. General information

Rosslyn Data Technologies plc (the "Company") is a company domiciled in the UK. The address of the registered office is 60 St. Martin's Lane, Covent Garden, London WC2N 4JS. The Company is the ultimate parent company of Rosslyn Analytics Limited and Rosslyn Data Management Limited, companies incorporated in the UK, and the ultimate parent company of Rosslyn Analytics, Inc., a company incorporated in the United States of America (collectively, the "Group"). The Group's principal activity is the provision of data analytics using a proprietary form, data capture, data mining and workflow management.

2. Accounting policies

Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.

Whilst the financial information included in this announcement has been prepared in accordance with EU adopted IFRS, this announcement itself does not contain sufficient information to comply with EU adopted IFRS. Statutory accounts for the year ended 30 April 2019 have been delivered to the Registrar of Companies and those for the year ended 30 April 2020 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts. Their reports were unqualified and did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498(2) Companies Act 2006 or equivalent preceding legislation.

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRIC) as adopted by the European Union and in accordance with the Companies Act 2006 as applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

Going concern

These financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due. Although the Group has made losses in the current year, much of this loss was due to non-cash items such as depreciation and amortisation. The Directors have prepared cash flow statements for the periods to 30 April 2022 to ensure going concern criteria are met, and they have also produced scenarios for any downturn.

Since the year end, the Company has raised £6.8m, net of expenses, and this balance is expected to be able to provide the Group with sufficient liquidity for the foreseeable future. In making this assessment the Directors have taken into account any potential impact arising from COVID-19, along with the impact on liquidity of other risks materialising.

Having considered the forecasts and downturn scenarios, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing these financial statements.

3. Segmental reporting

Management has determined the operating segments based on the operating reports reviewed by the Executive Directors that are used to assess both performance and strategic decisions. Management has identified that the Executive Directors are the Chief Operating Decision-Maker in accordance with the requirements of IFRS 8 Operating segments.

The determination is that the Group operates as a single segment, as no internal reporting is produced either by geography or division. The Group does view performance on the basis of the type of revenue, and the end destination of the client as shown below.

4. Operating EBITDA

Operating EBITDA is calculated from Operating loss as shown below.

5. Loss per share

Basic earnings per share is calculated by dividing the net loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the net loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.

As the Group recorded a loss for the year, the basic and diluted loss per share are the same amount.

Annual report and accounts

The annual report and accounts will be posted to shareholders shortly and will be available for members of the public at the Company's registered office 60 St. Martin's Lane, Covent Garden, London WC2N 4JS, and on the company's website www.rosslyndatatech.com .

Annual General Meeting

In light of the current UK Government measures and the Company's desire to protect the health and safety of shareholders and employees, the AGM this year will be run as a virtual meeting.

The AGM will be broadcast live on https://www.rosslyndatatech.com/investors/2020agm on 29 October 2020 at 11.30am, and will be available thereafter for viewing.

Shareholders are encouraged to submit proxy voting in accordance with the Notice of Annual General Meeting. Shareholders are also invited to submit questions beforehand to investors@rosslyndatatech.com and a representative selection of these questions will be addressed in the meeting.