Half Yearly Results€¦ · 31/12/2015 · Timetable Announcement of sales process 22 September...
Transcript of Half Yearly Results€¦ · 31/12/2015 · Timetable Announcement of sales process 22 September...
Half Yearly Results for the six months ended 31 December 2015
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This presentation, which has been prepared by Regenersis PLC (“the Company”), includes statements that are, or may bedeemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-lookingterminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “foresees”, “intends”, “may”,“will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statementsinclude matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or currentexpectations. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events andcircumstances. A number of factors could cause actual results and developments to differ materially from those expressed orimplied by the forward looking statements. Any forward-looking statements in this presentation reflect the Company’s view withrespect to future events and other risks, uncertainties and assumptions relating to the Company’s operations, results ofoperations, growth strategy and liquidity. The Company undertakes no obligation publicly to release the results of any revisions orup-dates to any forward-looking statements in this presentation that may occur due to change in its expectations or to reflectevents or circumstances after the date of this presentation.
This presentation comprises information which is already in the public domain. No reliance may be placed for any purposeswhatsoever on the information contained in this document or on its completeness. None of the Company, its advisers, or any otherparty is under any duty to update or inform you of any changes to the information contained in this presentation.
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Forward Looking Statements
Contents
� Executive summary
� Disposal of Repair Services
� Blancco results
� Operational KPIs
� Financial statements
� Conclusions and Outlook
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Executive Summary
� Agreement to sell Repair Services business for €103.5m
� Continued discussion with a number of parties in relation to Digital Care sale
� Strong results in the Continuing business, Blancco Technology Group
� Blancco significantly stronger – revenue, profit, geo and product splits, technology, team
� US market leader Tabernus acquired and fully integrated
� Successful launch of integrated data erasure and mobile diagnostics solution
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£3.2m
£2.0m
H1FY16 H1FY15
£1.3m
£2.7m
H1FY15H1FY16
£9.9m
£6.8m
H1FY16 H1FY15
2.43p
0.63p
H1FY16 H1FY15
Financial highlights (Continuing Business)
46% revenue growth(52% in constant currency)
Revenue growth
Headline Operating Profit (after corporate costs) *
Continuing Operations Headline OCF**
Cash conversion 119% (154% H1 FY15)
Adjusted EPS ***
*Headline Operating Profit’ is the key profit measure used by the Board to assess the underlying financial performance of the operating Divisions and the Group as a whole. ‘Headline Operating Profit’ is operating profit stated
before amortisation or impairment of acquired intangible assets and development expenditure capitalised, acquisition costs, exceptional restructuring costs, share-based payments, share of results of associates and jointly
controlled entities and profit/losses on disposal of jointly controlled entities.
**‘Headline Operating Cash Flow’ is a key internal measure used by the Board to assess the underlying cash flow of the Group. It is defined as operating cash flow excluding taxation, interest payments and receipts, acquisition
costs and exceptional restructuring costs. This measure excludes capital expenditure.
*** Adjusted earnings are stated before amortisation or impairment of acquired intangible assets and development costs capitalised, amortisation of bank fees, exceptional restructuring costs, acquisition costs, share-based
payments, losses on disposals of investments and jointly controlled entities, unwinding of the discounted contingent consideration, adjustments to estimates of contingent consideration, and tax impacts of the above. ‘Adjusted
earnings per share’ is the key earnings per share measure used by the Board.
108% profit growth (131% in constant currency)
286% increase in Adjusted EPS since H1 FY15.
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27.2% margin (19.1% H1 FY15)
Contents
� Executive summary
� Disposal of Repair Services
� Blancco results
� Operational KPIs
� Financial statements
� Conclusions and Outlook
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Repair Services Disposal
� Disposal for a cash consideration of €103.5 million
� Process was competitive and tightly structured
� Advised by William Blair
� Supported by vendor due diligence
� Non-exclusive throughout
� Purchaser CTDI is a privately owned repair and logistics company, founded in 1975 and headquartered in Pennsylvania, USA
� Separate disposal of Digital Care business underway
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Timetable
Announcement of sales process 22 September
Deal signed with CTDI 5 February
Shareholder vote 2 March
Completion subject to competition clearances
Q2
Tender offer Q2
Sources and Uses of Funds
� Consideration of €103.5m @ 1.32 equals £78m
� Expected return to shareholders of £50 million
� Repayment of all Group’s current debt
� Group to retain significant cash balance and ability to invest in acquisitions
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£’m
Headline Price 78.4
Deal fees (7.5)
Repayment of net debt (8.9)
Return of funds to shareholders (50.0)
Exit of PLC costs and other matters (2.1)
Net cash post deal 9.9
Contents
� Executive summary
� Disposal of Repair Services
� Blancco results
� Operational KPIs
� Financial statements
� Conclusions and Outlook
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Blancco Results
� Strong revenue growth of 46%
� 52% in constant currency terms
� Gross margin slightly reduced
� Primarily sales of diagnostic product
� SG&A increased by 24%
� Strengthened management team
� PLC corporate costs: this allocation of existing cost base reflects expected continuing costs following disposal of Repair Services
� Blancco HOP increased by 84%
� 100% in constant currency terms
� HOP margin increased to 35%
� Primarily due to operating leverage
� Headline Operating Cash Conversion of 119%
Dec 15 Dec 14
£ million H1 FY16 H1 FY15 Growth
Blancco Revenue 9.9 6.8 +46%
Cost of goods sold (1.1) (0.6)
Blancco Gross Profit 8.8 6.2 +42%
SG&A (5.3) (4.3)
Blancco Headline Operating Profit 3.5 1.9 +84%
PLC corporate costs (0.8) (0.6)
Group Headline Operating Profit 2.7 1.3
Depreciation and amortisation 0.4 0.3
Movement in working capital 0.1 0.4
Headline Operating Cash Flow 3.2 2.0
Blancco HOP margin 35% 28%
Group HOP margin 27% 19%
Cash conversion (HOCF / HOP) 119% 154%
Capital Expenditure (1.0) (0.8)
Blancco product development (0.9) (0.7)
Other capital expenditure (0.1) (0.1)
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Operating highlights
� Investments made since acquisition now coming through
� New senior management team
� Upgraded finance, marketing, sales and support processes and systems
� Built presence in USA
� Relocation of HQ to Atlanta
� Integration of the US market leader, Tabernus
� Enhanced technology leadership
� Patents for SSD (solid state drive) erasure issued for Europe, pending for US.
� Integrated Mobile erasure-and-diagnostics solution incorporating Xcaliber technology
� Rapid growth in sales of Live Environment Erasure products
Invoiced sales growth rate increasing from its trend mid-20% level to 40% in constant currency terms in the first half
Key market both in terms of access to clients and future ability to partner with leading players in the IT sector
Scale to invest in unique and proprietary technology represents a growing source of competitive advantage
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Contents
� Executive summary
� Disposal of Repair Services
� Blancco results
� Operational KPIs
� Financial statements
� Conclusions and Outlook
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Growth trend
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Invoiced Sales€ million
1. Invoiced Sales recognises both Volume and Subscription sales at invoice, rather than spreading Subscription sales over the term of the subscription
6.5 6.3
8.2 7.8
9.910.5
14.7
0
2
4
6
8
10
12
14
16
H1 H2 H1 H2 H1 H2 H1
FY13 FY14 FY15 FY16
Year on Year Growth
+26% +24% +21% +34% +48%
� Strongest growth in Live Environment Erasure (“LEE”) products, up 350%
� Blancco LUN, Blancco Virtual Machine, Blancco File
� Strong client interest in the technology
� Integration of SafeIT enabling step up in marketing and sales performance.
� Strong growth in Mobile products, up 50%
� In-house developed Mobile erasure product launched in December 2014
� Mobile diagnostics product launched in July 2015, incorporating Xcaliber technology
� Steady growth in IT products and services, up 28%
Products
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H1 2016 H1 2015 Growth Growth
£’m £’m £ CC2
LEE 0.9 0.2 350% 350%
Mobile 1.8 1.2 50% 50%
IT and other 7.9 6.4 23% 28%
Total 10.6 7.8 36% 40%
8%
17%
75%
LEE
Mobile
IT and other
3%15%
82%
LEE
Mobile
IT and other
H1 2016
H1 2015
Invoiced Sales1
1. Invoiced Sales recognises both Volume and Subscription sales at invoice, rather than spreading Subscription sales over the term of the subscription
2. Growth in Constant Currency terms (i.e. if exchange rates had stayed the same between the two periods)
37%
37%
26%NorthAmerica
Europe
Asia andROW
H1 2016 H1 2015 Growth Growth
£’m £’m £ CC2
North America 3.9 2.0 95% 95%
Europe 3.9 3.9 0% 8%
Asia and ROW 2.8 1.9 47% 47%
Total 10.6 7.8 36% 40%
� Strongest growth in North America, up 95%
� Significant investment in new management and sales personnel
� Strong LEE sales
� Acquisition of Tabernus
� Europe up 8%
� Relatively weaker in new categories of Mobile and LEE
� Changes in personnel, roles and focus associated with transition from Finnish to American leadership and HQ
� Focused on increasing growth in Europe going forwards
� Asia and Rest of World up 47%
� Strong performance in mobile in Japan
� First large scale deployment of the integrated mobile erasure-and-diagnostics solution
Geographies
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H1 2016
H1 2015
25%
50%
25%
NorthAmerica
Europe
Asia andROW
Invoiced Sales1
1. Invoiced Sales recognises both Volume and Subscription sales at invoice, rather than spreading Subscription sales over the term of the subscription
2. Growth in Constant Currency terms (i.e. if exchange rates had stayed the same between the two periods)
� This is a simple measure of client
retention, treating all clients equally
� KPI = % clients from prior 12 month
period (latest: calendar year 2014) who
purchased again from Blancco in the last
12 months (latest: calendar year 2015)
� While retention rate is high, further
initiatives to improve client support
processes are underway
Client retention
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Note: KPI is measured on a base of clients with Invoiced Sales over €10,000 per annum, which covers 88% of Blancco’s Trailing twelve month Invoiced Sales
82%83% 85%
86% 87% 88%
50%
60%
70%
80%
90%
100%
Jul-1
5
Au
g-1
5
Se
p-1
5
Oct-1
5
No
v-15
De
c-15
Trailing 12 Month Client Retention Rate %
Invoiced Sales Renewal Rate %:
Linear (Invoiced Sales Renewal Rate %:)
Revenue recurrence
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Note: * KPI is measured on a base of clients with Invoiced Sales over €10,000 per annum, which covers 88% of Blancco’s Trailing twelve month Invoiced Sales
� This is a measure of the level at which
our Invoiced Sales from existing clients
repeat from one year to the next
� KPI * = Invoiced Sales in the last 12
months (latest: calendar year 2015)/
Invoiced Sales in prior 12 month period
(latest: calendar year 2014)
� Blancco continues to benefit from good
growth in volumes within its installed
base of clients.
� Significant large sales in December
caused this metric to rise above its trend
level.
104% 106% 104%
112% 111%
126%
104% 106% 104%
112% 111%
126%
50%
60%
70%
80%
90%
100%
110%
120%
130%
Jul-1
5
Au
g-1
5
Se
p-1
5
Oct-1
5
No
v-15
De
c-15
Trailing 12 Month Sales Repeat Rate %
Invoiced Sales Renewal Rate %:
Linear (Invoiced Sales Renewal Rate %:)
� This is a measure of our success in growing the
average size of our client relationships
� KPI = Trailing 12 Month Average revenue per
client
� December 2015 level of £47,960 (December
2014: £43,154)
� Increase of 11.1% in GBP terms and 23.3% in
constant currency terms
.
Client value
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Note: KPI is measured on a base of clients with Invoiced Sales over €10,000 per annum, which covers 88% of Blancco’s Trailing twelve month Invoiced Sales
-
10,000
20,000
30,000
40,000
50,000
60,000
Qtr4
'13
Qtr1
'14
Qtr2
'14
Qtr3
'14
Qtr4
'14
Qtr1
'15
Qtr2
'15
Qtr3
'15
Qtr4
'15
Qtr1
'16
Qtr2
'16
Invo
iced S
ale
s (
£)
Average Invoiced Sales Per Client
Average Invoiced Sales Per Client
Linear (Average Invoiced Sales Per Client)
Management Priorities for FY16
� Maintain Blancco CAGR
� Focus on execution in sales, marketing and client experience
� Grow the USA
� Hire and train enterprise sales professionals to target key verticals
� Drive New Technologies Sales Globally
� Extend out Mobile and Live Environment products out across our global footprint
� Invest in Xcaliber Diagnostics
� Further strengthens our traditional USPs for ITADs and Service Partners – and opens up new markets
� Leverage Marketing, Sales, Management and Ecommerce
� Increase our lead flow and conversion rates – and move small accounts to e-fulfilment
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Contents
� Executive summary
� Disposal of Repair Services
� Blancco results
� Operational KPIs
� Financial statements
� Conclusions and Outlook
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Financial reviewIncome Statement (Continuing Operations)
� 46% revenue growth – 52% under constant currency
� 84% growth in headline operating profit before Corporate costs –100% under constant currency
� Lower M&A costs, with the most significant costs relating to the acquisition of Tabernus and Xcaliber investment.
� Increased tax charges a result of higher profits generated by the Software group globally, mainly in jurisdictions that attract higher tax rates.
£’million H1FY16 H1FY15
Revenue 9.9 6.8
Headline operating profit before corporate costs 3.5 1.9
PLC corporate costs (0.8) (0.6)
Headline operating profit after corporate costs 2.7 1.3
M&A costs (0.8) (1.3)
Exceptional Restructuring Costs - (0.1)
Amort'n of intangible assets (1.3) (1.0)
Share-based payments (0.4) (0.4)
Share of results of associates and jointly controlled entities
(0.0) (0.3)
Group operating profit 0.2 (1.8)
Unwinding of deferred consideration (0.1) (0.0)
Other finance income - 0.0
Other finance charges (0.4) (0.4)
Profit before tax (0.3) (2.2)
Tax (0.4) (0.3)
Profit after tax (0.7) (2.5)
Post-tax profit from discontinued operations (see slide 22)
1.1 6.8
Profit for the period 0.4 4.3
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Financial reviewIncome Statement (Discontinued Operations)
� M&A costs in the period are predominantly for disposal related costs.
� Further costs are anticipated in H2 upon completion and for Digital Care sales process
� Tax credit in H1 FY15 on prior year losses, not repeated in current period
£’million H1FY16 H1FY15
Revenue 99.9 95.1
Headline operating profit before corporate costs 6.6 6.7
PLC corporate costs (1.8) (2.0)
Headline operating profit after corporate costs 4.8 4.7
M&A costs (1.9) -
Exceptional Restructuring Costs (0.2) (0.3)
Amort'n of intangible assets (0.3) (0.2)
Share-based payments (0.4) (0.1)
Group operating profit 2.0 4.1
Unwinding of deferred consideration (0.2) (0.4)
Revaluation of contingent consideration
- 2.2
Other finance income 0.0 0.0
Other finance charges (0.6) (0.3)
Profit before tax 1.2 5.7
Tax (0.1) 1.1
Profit after tax 1.1 6.8
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Balance sheet
� Goodwill arising on Tabernusacquisition
� Blancco deferred income of £3.1m (FY15: £2.4m), an increase of 29%
� Net assets held for sale represent the Repair Services and Digital Care business.
� Blancco working capital:
£’million H1FY16 FY15
Non current assets
Goodwill and investments 42.7 85.1
Acquired intangible assets 20.3 20.4
Internally generated intangible assets 2.5 6.6
Tangible assets 0.3 6.4
Deferred tax - 0.6
65.8 119.1
Current assets
Stock 0.2 9.5
Debtors 4.4 34.6
Creditors (6.2) (38.1)
Deferred income (3.1) (2.4)
Provisions (0.3) (0.4)
Other net current liabilities (1.4) (2.4)
Net assets held for sale 75.3 -
68.9 0.8
Net Cash (8.9) 7.8
Non current liabilities
Contingent consideration (2.2) (4.0)
Provisions (0.9) (1.0)
Deferred tax (1.9) -
(5.0) (5.0)
Net assets 120.8 122.7
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H1 FY16 FY15
£’m £’m
Stock 0.2 0.1
Debtors 4.4 3.2
Creditors (3.5) (2.6)
DeferredIncome
(3.1) (2.4)
Total (2.0) (1.7)
£7.8m
£9.9m
£0.1m
0.0
2.0
4.0
6.0
8.0
10.0
12.0
£ m
illio
ns
Interest, tax and foreign exchange
movements
Cash conversion of 119% (H1 FY15:
154%)
Cash flow – continuing operations
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Tabernusacquisition -
$10m
Tabernus and Xcaliber deal
costs
Continuing Operations Investing Activities
£0.1m
£1.3m
(£8.9m)(10.0)
(8.0)
(6.0)
(4.0)
(2.0)
0.0
2.0
4.0
6.0
8.0
£ m
illio
ns
Interest, tax and foreign exchange
movements
Cash flow – discontinued operations
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Repair Services M&A fees and earn outs
Cash conversion of 50%
Earnings Per Share (continuing business)
£’m FY16H1 – as reported
FY16 Full year – forecast
FY16Full year –
following buy back *
Divisional Headline Operating Profit 3.5 7.2 7.2
Corporate costs (0.8) (1.5) (1.5)
Headline Operating Profit 2.7 5.7 5.7
Reconciliation to adjusted profit:
Finance costs (0.3) (0.6) (0.6)
Taxation (0.3) (0.7) (0.7)
Profit attributable to non-controlling interests (0.2) (0.5) (0.5)
Adjusted Profit 1.9 3.9 3.9
Weighted average number of shares 76.6 76.6 50.7
Adjusted Earnings Per Share 2.43p 5.14p 7.76p
* buy back of 25.9m shares at £1.93 per share (market price on 4 March 2016), assumed effective for full period
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Contents
� Executive summary
� Disposal of Repair Services
� Blancco results
� Operational KPIs
� Financial statements
� Conclusions and Outlook
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Conclusions and outlook
� Blancco performed strongly in the first half across its financial and operating KPIs
� Growth in the right places: Live Environment Erasure and the strategically important North American market
� Strong H1 performance and continued strong growth trends at the beginning of the second half of the year, the board anticipates a full year result in line with market expectations
“Blancco has again demonstrated its ability to grow sales at a rapid pace while maintaining strong profit margins and cash flow, testament to the efforts of the Blancco team, and the value of holding a unique competitive position in an exciting growth sector. In the coming weeks, I look forward to completing the Group’s transformation into a very exciting software opportunity, unique in the UK publicly quoted market”
Matthew Peacock, Executive Chairman
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Appendix
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Acquisition of Tabernus
� Acquisition of 100% of Tabernus LLC and Tabernus Europe Ltd in September 2015
� US market leader in data erasure, and global number two behind Blancco
� Founded 2002, headquartered in Austin, TX
� Consideration of $12 million comprising $10 million cash and $2 million deferred cash
� In H1 2016, performance was in line with expectations
� Complementary product portfolio in hardware-driven data center erasure
� Business has been fully integrated into the Group across sales, support, development and other operations
� Further strengthens Blancco’s market leadership
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Xcaliber
� Xcaliber Technologies, in which the group holds a 49% stake, is a smartphone diagnostic software business.
� In FY15, Xcaliber secured its first two major contracts.
1. SmartChk in-store kiosks at over 200 stores of a large mobile operator in the USA
2. SmartChk device-pre-installed diagnostic solution for a major mobile phone OEM in India.
� In H1 FY16, Xcaliber has generated revenue streams with a number of other key strategic customers
� Xcaliber technology has been integrated into Blancco’s mobile product, generating a revenue stream in Blancco
� First major deployment occurred in the period just ended
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Enterprise Erasure Objectives Today
Security
• Prevent valuable or sensitive files, emails, and data sets from leaving the organisation
• Including security data such as passwords and encryption keys which could enable an attack
Compliance
• Demonstrate compliance with a growing raft of legislation and regulation
• Limit damage in the event of a data loss or breach
Asset recovery
• Recover maximum value of assets through non-destructive sanitization
When selecting a data erasure solution, 67% of IT Executives state that a Digitally Signed, Tamper-Proof Audit Trail would 100% Affect Their Purchasing Decision
Source: Blancco survey of 242 IT Managers/Directors and 256 IT Executives across 12 Countries, 17 Industries32
• EU GDPR and the “Right To Be Forgotten”• ISO 27001, 27018, 27040• Federal Information Security Management Act (FISMA)• Federal Desktop Core Configuration• Healthcare Information Protection & Accountability Act (HIPAA)• Payment Card Industry Data Security Standard (PCI DSS)
Legal/ Regulatory Change
High Profile Data Breaches
Underlying trends
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“Highly motivated organizations are too often sloppy with unwanted
hardware”
“By replacing physical destruction most organizations will be able to reuse
or sell surplus equipment”
“News reports and hacker blogs brag about finding
unwiped disks on eBay or in the trash heap”
“Implement policies that
assign responsibility for
all media carrying sensitive or regulated
organizational data”
“Equipment is often cannibalized, borrowed or stolen when left in open-
access areas”
Root Cause Symptoms Prescription
“[Organisations do not] verify that the ITAD is following through on
commitments to destroy data.”
Asset Recovery
Hype Cycle for Data and Collaboration Security, 2013
Gartner’s Perspective on Enterprise Erasure
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Target Addressable Market in Enteprise End of Life Erasure
Blancco Today $28 million
$2 Billion Market Opportunity
2 billion devices leaving enterprises per year (2016)1
Rising to 2.5 billion by 2020
Currently addressed by a patchwork of less effective sanitisation methods
1. Gartner and IDC35
Patchwork of Existing Approaches to Device Sanitisation
• Incomplete coverage
• Ineffective methods (data can be recovered)
• No audit trail possible
• Not integrated to other systems and workflows
• Many valuable assets are physically destroyed
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• Single point of control
• Full reporting and auditability
• Integration to other systems and workflows
Blancco Value Proposition
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Diverse hardware
Complex clouds
Local standards
Global
deployment
Scale of Enterprise challenge
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Diverse hardware
Complex clouds
Local standards
Global
deployment
Erases more types of device than anyone else
Erases more types of device than anyone else
Erases Files, Folders, LUNs and Virtual Machines
Erases Files, Folders, LUNs and Virtual Machines
Provides local support on the ground in 26 countriesProvides local support on the ground in 26 countries
Maintains more international erasure
certifications than anyone else
Maintains more international erasure
certifications than anyone else
The market leader in data erasure
The market leader in data erasure
Blancco USPs
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Erasure Market Direction of Travel
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Physical level
PCs and laptops
HDD to SSD
Servers and loose drives
Smartphones and tablets
Networking equipment
Automobiles and IoT
Logical level
Whole drives / machines
LUNs and Virtual machines
Specific files and folders
Encryption keys
Database records
User spaces / cloud
Directionof travel
ErasureTrigger
End of life
Between users or clients
End user tools
Scripted/ scheduled
Data lifecycle management
ComplianceApproach
Honor system
Tamper proof certification
Central Reporting and Management
Integration with other systems and workflows
Access /Deployment
Side loaded
Cloud deployed
OEM integrated
Application and OS integrated
Partners & Go to Market
ITADs
Enterprise IT Service Providers and VARs
IT Asset Management software
Infrastructure and cloud Managed Service Providers
Blancco USPs
3rd party accreditations
Global support
Brand
Patented /proprietary features
Partner ecosystem
40