Nasstar plc (LON: NASA), a provider of hosted managed and cloud computing services, announced today its unaudited interim results for the 6 months ended 30th June 2019.
· Revenue up 2% compared to the same period last year to £12.8m (H1 2018: £12.5m)
· 90% of H1 2019 revenue generated from contracted recurring services (H1 2018: 91%)
· EBITDA* in line compared to the same period last year £2.8m* (H1 2018: £2.8m), however up 19% on H2 2018 (H2 2018: £2.4m)
· Adjusted EBITDA** in line compared to same period last year £3.0m** (H1 2018: £3.0m), however up 17% on H2 2018 (H2 2018: £2.6m)
· Adjusted EBITDA** margin of 24% (2018: 22%)
· Operating profit for the period was £0.5m (H1 2018: loss £0.3m)
· Adjusted Profit Before Tax*** in line compared to same period last year £1.8m (H1 2018: £1.8m), however up 38% on H2 2018 (H2 2018: £1.3m)
· Net cash+ position improved to £2.4m (H1 2018: £1m)
· Adjusted earnings*** per share 0.3p for 6 months to 30 June 2019 (H1 2018: 0.3p)
· Basic profit per share 0.1p for 6 months to 30 June 2019 (H1 2018 loss (0.1p))
*Comprising earnings adjusted for interest, taxation, depreciation, profit on sale of fixed assets and amortisation
**comprising earnings adjusted for interest, taxation, depreciation, profit on sale of fixed assets, amortisation, share based payments and exceptional items (being costs in relation to reorganisation and data centre closure)
***adjusted for amortisation of acquired intangibles, share based payments and exceptional items
+comprising cash less interest-bearing bank loans and borrowings
· The final year of the “Nasstar 10-19” integration strategy has seen the final stages of the Data Centre (DC) consolidation strategy near completion in H1 with all live private cloud platforms now being delivered from two primary DCs.
· The remaining priority focus of “Nasstar 10-19” centres around internal system consolidation and process automation. This has seen the delivery of an upgraded Dynamic NAV platform (finance) whilst the roll out of the new central IT service management system (Cherwell) has continued, completion of the initial roll out is expected in H2.
· Internal systems automation, powered by Cherwell, offers an opportunity to deliver further efficiencies, with work stream automation to continue into 2020 and beyond.
· The new Head of PMO (project management office) appointed in October 2018, has focused heavily on project and process improvement for complex and large-scale technical deliveries, improving management information, resource management, project scheduling and delivery efficiency.
· The implementation of the previously announced three-year contract with a top 50 UK law firm has been an important work stream for the project and technical teams. Monthly revenues from this contract will begin to be recognised in H2 though full deployment will stretch into H1 2020.
· Nasstar continue to develop and invest in their talent management programme designed to help attract and retain talent in the continuing hyper competitive technical employment market.
Nigel Redwood, Chief Executive Officer of Nasstar plc, commented:
“It is very pleasing to see the “Nasstar 10-19” programme come to fruition, delivering a more unified and streamlined Nasstar. With this nearing its conclusion we now enter a new period for the Group for which we are currently formulating strategic priorities; we look forward to providing more detail in due course.
Our central ITSM system, Cherwell, provides an opportunity to invest in further automation that will not only deliver efficiencies but drive further improvements in the consistency of our operating teams, delivering a continually improving support experience to the customer.
It was pleasing to see gross profit margins recover to 65% in the period, up from 63% in H2 2018, thanks to the mitigating strategies that we started to implement at the end of 2018.
We have seen decision timelines for both new business and current customer projects extended as a result of the continued political and economic uncertainties caused by BREXIT, notably from Q2 onwards so our focus on mitigation strategies is constant. Despite these challenges Nasstar continues to trade well, delivering another six months of solid performance.”
As previously announced, I am stepping down as Chairman on the 23rd October 2019 and I am very pleased that the final five years of my tenure has seen Nasstar develop into one of the leading players in the hosted managed and cloud computing marketplace. We have really embraced the technical developments in both the private and public cloud space and this, combined with our vertical market focus, has seen the business go from strength to strength in recent years. I have every confidence that Nick Bate, as new chairman, will help build on the foundations that have been laid and I wish him and the rest of the management team, including Ben Marnham who joins the Board next month, all the very best for the future.
The timing of my departure coincides with the conclusion of our three-year integration strategy “Nasstar 10-19”. The strategy has seen the business focusing on ensuring we have the right leadership team running the business with one team for each function, that we have consolidated our technical footprint and service portfolio, invested in our talent management, whilst focusing on efficiencies with backend systems and automation. Our customer strategy and security at the heart of all we do have been underpinning pillars throughout the integration.
I am pleased to report that in H1 our key KPI’s were in line with our expectations with continued focus on contracted recurring revenues being at the heart of our financial stability. The achievement of our H1 KPI’s despite the very challenging political and technical landscape coupled with the pressure we see in wage inflation caused from the strong labour market is testament to the “Nasstar 10-19” strategy.
Work in progress (WIP), being orders signed but not yet delivered (or recognised in revenue), continues to keep the project team busy with in excess of £150,000 monthly recurring revenue in WIP at the end of June 2019. This continues to demonstrate the strong visibility of earnings of the Nasstar model.
As expected, the Group is for the first time reporting a statutory profit for the period which is as a result of the reduction in the amortisation of customer intangibles that were recognised on the acquisitions to date. Our integration strategy has structured the business to be able to more effectively recognise revenue and cost synergies from any potential acquisition and therefore the board do continue to be alert to any opportunities to augment organic growth through selective acquisitions.
As a business we are very alert to the range of exit possibilities that the BREXIT process could deliver, and we continue to monitor the increased risk and uncertainty closely. It is very encouraging that in H1 we have been able to meet profit KPI’s in these circumstances despite the increased hesitancy we are witnessing in the sales process.
On this my final Chairman’s Statement I would like to thank the Board, management team and every member of the organisation for their hard work, dedication and commitment over the years.