Nasstar Plc (LON:NASA) CEO Nigel Redwood talks to DirectorsTalk about its positive trading update for the year ended 31 December 2017. Nigel explains what has driven the growth during the period, how they achieved a swing to a net cash position from the prior net debt situation, further expectations, the ‘Nasstar 10-19’ programme and the main focus areas for the company in the next few months.
Trading for the year closed out positively with our careful strategic focus delivering Adjusted EBITDA* slightly ahead of management expectations. Due to positive cash generation in the year, the Company delivered a significantly improved net cash position of approximately £1.0m which compared to net debt of £2.8m in 2016.
Group Adjusted EBITDA margins have moved ahead to c.23% (2016: 20.3%), up year on year and on track to deliver against our “Nasstar 10-19” target to raise margins from 20% to 25% of revenue by the end of 2019.
Organic business development has progressed well in 2017. Our industry leading capability in “public/private” cloud hybrid solutions was in evidence in November’s contract win which secured a three year contract to deliver a fully managed public/private Hybrid cloud solution to a global workforce of 1,000 users. In addition, two further notable contract wins closed out towards the end of the year in recruitment, one of our key vertical markets.
The strategic plans for 2017 were very much focused on maximising the opportunity that was presented by the previous three years’ acquisition activity. This focus saw the launch of the “Nasstar 10-19” programme designed to deliver an increased strategic focus to create one fully integrated business.
An objective of “Nasstar 10-19” is to develop a consistent first class approach to customer service and therefore investment continued in the account management team. This investment is vital to ensure customers are proactively managed and revenue opportunities within the wider client base maximised. In addition, investment continued on internal systems with the project to roll out Cherwell, our single IT Service Management tool, which is gaining momentum, with full adoption expected in H1 2018.
As part of the “Nasstar 10-19” programme, plans were initiated to close three of the Group’s seven UK data centres. One of these three was successfully closed in 2017 with the final two now due for closure during 2018.
IFRS 15 “Revenue from Contracts with Customers” is effective for annual reporting periods beginning on or after 1 January 2018. Assessment of the impact of adoption has been a key focus in H2 2017 and full disclosure of the impact and transition approach will be provided in due course.
We are also assessing IFRS 16 “Leases” which is effective for annual reporting periods beginning on or after 1 January 2019. It is likely that we will adopt IFRS 16 early to enable clearer comparative numbers to be presented in the next financial year and beyond.
*Comprising earnings adjusted for interest, taxation, depreciation, amortisation, exceptional items and share based payments.