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Osirium Technologies (OSI)

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Tuesday 24 April, 2018

Osirium Technologies

Final Results

RNS Number : 8515L
Osirium Technologies PLC
24 April 2018
 

 

For immediate release

24 April 2018

 

Osirium Technologies plc

 

("Osirium" or "Group")

 

Final Results

 

Osirium Technologies plc (AIM: OSI.L), a leading cyber-security SaaS vendor, built on robotic process automation (RPA) technology, today announces its final results for the 12 months ended 31 December 2017.

 

Operational highlights

·     Strong progress made by building sales momentum with existing and new customers in the UK and abroad, demonstrated by invoiced sales up 123% and total revenues up 63% YoY

·     A number of new blue chip customers across several new industry verticals

·     A number of upsells and renewals reflecting high customer retention and increasing awareness of Privileged Access Management ("PAM")

·     Our largest contract win to date with a leading global asset management company renewed for a further 12 months, with the project progressing according to plan

·     Largest international contract to date with one of the leading telecommunications companies in the Middle East

·     Senior sales and marketing team in place and business development directors appointed in Middle East and Germany - already producing results

·     Signed distribution and reselling agreements with multiple channel partners globally including Progress Distribution (UK), Adyton (Germany, Austria & Switzerland) and Spectrami (Middle East)

·     Osirium named as a 'Cool Vendor' by Gartner for Identity & Fraud Management

 

Post year end

·   Momentum has continued to grow in the first few months of 2018

·   New customers signed up in Q1

·   Successful Placing raising £4.2 million in March 2018, with existing and new shareholders

·   Agreement signed with Progress Distribution in the UK

·   Partnership with EB2BCOM to supply software in Asia Pacific

·   Contract win with a global online fashion retailer

·   Accelerating traction within the NHS with 3 new contract wins with the NHS

·   PxM Platform now available in the Microsoft Azure Marketplace

 

Financial highlights

•   Total Revenue of £647,580 (2016 12m period: £397,678), up 63% YoY

·   Total Bookings of £876,323 (2016 12m period: £393,826), up 123% YoY

•   Operating loss of £2,296,814 (2016: £1,822,497), in line with Management expectations and primarily reflecting increased investment in sales and marketing and additional headcount in the R&D and Customer Support teams

•   Cash and cash equivalents as at 31 December 2017 of £1,023,811 (2016: £3,572,794)

 

 

 

David Guyatt, Chief Executive Officer, commented:

 

"We are pleased with Osirium's performance for the year ended 31 December 2017 as the Group continues to build momentum and value. 

 

Osirium has a unique proposition and is building an increasingly strong pipeline of opportunities across a broad range of corporate sectors.  Since the year end, the funds raised in March 2018 will provide us with the capital to invest further in our sales, marketing, R&D and engineering teams to ensure the Group's momentum continues.  As the global cyber-security market continues to grow and with General Data Protection Regulation (GDPR) on the horizon, Osirium is well positioned and is sufficiently differentiated to take advantage of this opportunity. 

 

The Group has built strong foundations for the year ahead and we look forward to updating shareholders on future progress."

 

- Ends -

 

For further information:

Osirium Technologies plc

Tel: +44 (0) 118 324 2444

David Guyatt, Chief Executive Officer

Rupert Hutton, Chief Financial Officer

www.osirium.com

 

 

Stifel Nicolaus Europe Limited

Nominated Adviser and Broker

Tel: +44 (0) 20 7710 7600

Fred Walsh / Neil Shah / Ben Maddison

 

 

Yellow Jersey PR

Financial PR

Sarah Hollins

Tel: +44 (0) 7764 947137

 

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR").

 

Photography

Photography is available, please contact Sarah Hollins at [email protected]

The preliminary announcement does not constitute full financial statements.

 

The results for the year ended 31 December 2017 included in this preliminary announcement are extracted from the audited financial statements for the year ended 31 December 2017 which were approved by the Directors on 23 April 2018. The auditor's report on those financial statements was unqualified and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.  

 

The 2017 annual report is expected to be posted to shareholders and included within the investor relations section of our website on 24 April 2018 and will be considered at the Annual General Meeting to be held on 24 April 2018. The financial statements for the year ended 31 December 2017 have not yet been delivered to the Registrar of Companies.

 

The auditor's report on the consolidated financial statements of Osirium plc for the period ended 31 December 2016 was unqualified and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006. The financial statements for the period ended 31 December 2016 have been delivered to the Registrar of Companies.

 

Notes to Editors:

About Osirium

Osirium Technologies plc (AIM: OSI.L), is a leading cyber-security SaaS vendor, built on robotic process automation (RPA) technology.  Osirium protects critical IT assets, infrastructure and devices by preventing targeted cyber-attacks from directly accessing Privileged Accounts, removing unnecessary access and powers of Privileged Account users, deterring legitimate Privileged Account users from abusing their roles and containing the effects of a breach if one does happen.

 

Osirium has defined and delivered what the Directors view as the next generation PAM solution.  The team has developed the concept of Virtual Air Gap to separate users from passwords, with Osirium's Privileged Task Management module which is built on Robot Automation technology and further strengthens Privileged Account security by minimising the cyber-attack surface and delivering impressive return on investment benefits for customers.

 

Founded in 2008 and with its headquarters in Reading, UK, the Group was admitted to AIM in April 2016.  For further information please visit www.osirium.com

 

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

 

We are very proud to report the final results for the 12 months ended on 31 December 2017.  Osirium continues to gain both mind and market share globally, highlighted by our recent results and a record pipeline of new prospects and opportunities.

 

The Group's focus since our IPO in April 2016, has been both on building and supporting our UK and global distribution network, and on the construction of a dedicated team to manage channel partner and existing customer relationships.  Osirium has made some significant strategic steps over the last 12 months.  The Group has continued to win business globally based on the quality of our products, ease of use and local presence, with a 100% renewal rate.  This has been supported by upscaling our sales and marketing team with 7 new hires during the period.

 

In March 2018, Osirium successfully raised £4.2 million through a Placing, to strengthen the balance sheet and fund the Group's working capital requirements over the next twelve months and beyond. The proceeds will be used to invest further in Osirium's sales and marketing, while the Group's product development plans will accelerate with its plan to grow its engineering and R&D teams to provide further innovative 'next generation' additions to grasp a leadership claim on the growing billion dollar PAM market.

 

Osirium like any organisation is only as good as its employees.  On behalf of the Board, we would like to thank the whole team for their dedication and hard work.

 

We remain very confident in the Group's prospects and believe Osirium has a unique proposition and is well placed to prosper as cyber-security becomes an even greater priority for corporates globally.

 

Results

 

Revenue was up £249,000 versus the same 12 month period in 2016.  The revenue in each period was driven by the increase in bookings from £393,826 to £876,323 resulting in a 123% rise in total revenue for the comparable 12 month period in 2016.  As of 31 December 2017, the Group had cash balances of £1,024,000, this balance has been boosted by the recent fund raise of £4,200,000.

 

Osirium's loss before tax for the 12 months to 31 December 2017 was £2,296,814 compared with a loss before tax of £1,822,497 for the 14 months ended 31 December 2016.  Revenue for the 12 months was £647,580, versus £477,577 for the previous 14 month period.

 

The Group has also continued to increase its investment in R&D this past year.  During this period, £1,254,000 has been capitalised; an increase of 53% from the previous year.  The focus of this R&D investment has been on refining and further developing our next generation PAM solution, the PxM Platform, our proposition and working hard to exceed both new and prospective clients' expectations.  The Group anticipates SaaS revenues to increase further during 2018 and is also targeting increased service revenues with the addition of extra consultancy resource.

 

Strategy and Market

 

Since Osirium's IPO in April 2016, cyber-security attacks continue to be one of the most critical business disablers, particularly where the defence of prized business data is concerned.  During 2017, no sector was immune to cyber-attacks.  According to UK government figures, around 46% of businesses have now suffered a digital attack.  With 5.5 million companies in the UK, that is 2.2 million companies compromised in some way by a cyber-attack over the course of just 12 months.  These numbers increase with the size of business, with 66% of medium-sized and 68% of large corporations subject to an attack.

 

The pace and volume of attacks continue to accelerate, as does the momentum from organisations both in the public and private sectors transitioning 'on-premise' IT services to the Cloud.  As a result, "hybridised infrastructure" is becoming the norm, adding further security complexity because of the broad mix of access policies required and the whereabouts and criticality of their data.  Migration to the Cloud is an important agenda item for most organisations, offering reduced time and costs to deploying projects.  Over the period, the Group has seen significant advances in the way technology is provisioned and taken action by making PxM available on the Azure Marketplace platform, which is an online applications and services marketplace managed and operated by Microsoft.

  

Osirium's complete and "built-for-purpose" next generation PxM Platform solution is well placed for meeting today's current requirements by both being easy to deploy and simple to use.  Furthermore, the Group's innovative Task Automation technology was incorporated into its PxM platform from day one to provide customers with an even more secure PAM solution, combining the unique productivity benefits of Robotic Process Automation, or RPA, while better managing the "digital workforce" through strict security, data integrity and regulatory standards. Many of Osirium's customers have already seen how the Group's Automation platform helps to improve business efficiency and processes.   A recent study by one of Osirium's customers found time savings of more than 80% for their ten most common administrative tasks.

 

Looking not too far into the future, the Group's RPA platform will become more cognitive as machine learning triggers the next rapid wave of innovation, with software robots gaining intelligence by adapting and learning from mistakes.  Analysts predict that by 2025, close to a third of jobs will be carried out by automated software and smart robots, as personnel replaced by RPA are reassigned to more important and higher cognitive tasks.

 

Global analyst firm Gartner has reported an increased interest in PAM solutions from small to midsize businesses, who are often unregulated, particularly in North America, with the trend noticeable in other markets.  Not only are smaller businesses now able to see how they can benefit from PAM, but a range of regulatory compliance standards are driving mid-sized and mainstream business adoption, GDPR being one where organisations are faced with the threat of fines as high as 4% of revenue in the event of a data-breach, transitioning the need for cyber-security solutions such as PAM from 'nice-to-have' to 'must-have'.  This remains a significant greenfield opportunity for the Group.  The global growth in demand for midmarket cyber-security solutions has given way to some exciting new customer enquiries and partner acquisitions for Osirium.

 

Gartner has also noted a continuation of the trend where enterprises who have committed to a PAM solution for compliance reasons are now looking at extending their deployments deeper into their businesses.  This directly resonates with Osirium's "land and expand" strategy which delivered significant results during the period, demonstrated by the high level of customer retention, and the Group's continued strength of account management of our growing base.

 

Interest in PAM tools is driven by several factors:

•      Cyber-security focused legislation and regulation, including GDPR and cyber-essentials

·      Increased security threats, and their scale and frequency

·      Privileged Accounts remaining critical targets for cyber-attackers

·      Damage to corporate reputations, and erosion of public confidence and trust

·      Growth in the outsourcing of IT functions and the need to grant privileged access to third parties, including vendors, contractors, and service provider technicians

•      An increasing number of Internet of Things (IoT) connected work devices

•      Evolving IT infrastructure and the need to readdress requirements for a comprehensive cyber-security strategy, particularly for critical infrastructure

 

Osirium has an unparalleled focus on the PAM market.  This is becoming an increasingly vital part of the overall picture that is the Identity and Access Management market, as organisations realise the importance and benefits of identifying, controlling and minimising risks from within.  Privileged accounts remain critical targets for cyber criminals, and Osirium protects and manages those Privileged Account activities, denying attackers access to those primary targets.

 

Market Review

 

Organisations' purchasing habits are moving from perimeter-securing firewalls to more complete solutions that add internal layers of security to a business.  The PAM market growth remains robust and is set for continued double-digit growth.  The overall PAM market also remains dominated by the sale of legacy on-premises software.

 

Cyber-security spending hit $89 billion in 2017, growing 8% over 2016. By 2020, organisations with PAM tools will have at least a 50% lower risk of impact by advanced threats as compared to peers without, according to Gartner.  They also estimate that PAM will continue to grow at a CAGR of 27% through 2020, accounting for 2% of all cyber-security spending and 38% of the Identity and Access Management market.

Analysts anticipate that by 2020, not only will over 40% of PAM vendors (up from the 10% today) integrate machine learning and other predictive analytics techniques into their solutions, but over half of the security failures associated with IaaS and PaaS will be directly attributable to gaping holes in security caused by a lack of PAM technology and processes.  With Task Automation at the core of the PxM Platform solution, Osirium is well placed to take advantage of this maturing requirement. Leading independent Technology sector analyst firms, Gartner and IDC, value the addressable market for PAM in terms of annualised spend, at $1-2 billion, however, an authoritative bottoms-up analysis of the market based on customer lifetime value, has recently sized the market at $44 billion. Osirium believes this is a better reflection of the greenfield demand that the Group is experiencing for our products.

 

By 2020, approximately 75% of large enterprises will utilise PAM products, up from less than 40% today.

 

Executing our strategy

 

The Group's sales and marketing focus continues to build brand momentum, industry recognition and thought leadership.  Osirium's continuing achievements in growing the brand in 2017 has led to thought leadership discussions at prestigious industry events including large corporate forums with the UK's largest broadcaster and media groups in attendance.

 

2017 also delivered formal recognition of our innovation from Gartner with Osirium being presented with the Cool Vendor Award for Identity and Fraud Management.  The Group believes being included in Gartner's Cool Vendor report is of huge significance to our business.  Seeing Osirium's PxM Platform evaluated in this report illustrates the team's dedication and innovative approach to breaking through the cyber-security newsflow with a topical niche.  For Osirium, this is a company-wide achievement and the Group will certainly be enjoying the attention and benefits of becoming a Gartner Cool Vendor.

 

Throughout 2017, the Group focused on building a 100% channel sales organisation.  This included scaling awareness, building cohesive partnerships and trust with the growing global partner community.  With Osirium's reputation for high customer retention, key services have been added to the portfolio including 24/7 global support that reinforces the vision of building trusted relationships, supporting our customers anywhere and at any time.

 

This year, Osirium has engaged with over 24 channel partners to extend the Group's footprint, helping deploy our PAM solution and build on the results and momentum achieved in 2016.

 

Looking at 2018, the Group's key development areas are:

•     Accelerating sales momentum and our new prospects pipeline in a rapidly growing market; we now believe PAM to be a mainstream requirement and a "must have"

•     Promoting our 'next generation PAM innovator' message supported by our goal to be a dominant mid-market cyber-security brand in a >90% greenfield market

•     Continuing our low-risk overseas market development in Germany and the Middle East

•     Drive "sticky" entry level deployments to stimulate future upsell opportunities

•     Scaling UK and overseas channels to support a committed global partner base

•     Investing and strengthening our winning cyber-security leadership team

•     Growing market share through rigorous pipeline management and agenda setting innovation

•     Building on the success of our 'land and expand' strategy, showing customers the breadth and depth of innovation in our PxM platform

•     Continuing implementation of a Global Technical Support culture and infrastructure

•     Maintaining the Group's marketing momentum and evolving the Osirium brand into a confident and powerful global icon

•     Continued thought leadership activity and influencing of the influencers

•     Maintaining our technology leadership with four patents pending and with new routes to market continually being investigated.

 

New customer acquisitions in existing and new markets

 

Osirium has acquired over 30 "high-profile" customers across multiple industry sectors over the years and with a number of new customers signed in Q1 2018, we expect our momentum and growth to continue.  These sectors include insurance, financial services, healthcare, higher education, luxury goods, critical national infrastructure, legal, telecoms, gaming, MSP's & MSSP's, and private equity and asset management.

 

The Group has also made significant upsells and renewals over the period, reflecting high customer retention since 2016. 2017 saw Osirium's largest customer, a leading global asset management company, renewing for a further 12 months.  The Group was also awarded its largest international contract to date with one of the leading telecommunications companies headquartered in the Middle East.

 

The management team has extensive experience in successfully driving mid-market channels and partner programs to scale up demand creation and pipeline volumes.  Regional partnerships are now in place with trusted distribution partners including Progress Distribution in the UK with a view to extending reach in the UK with the appointment of a complementary distribution partnership.  With Spectrami covering the Middle East and Adyton establishing a 'bridge-head' into Germany, the Group is confident these partnerships will continue to fuel growth.  Osirium's distribution and growing reseller community are looking for technologies to drive new revenue opportunities within their businesses, and the Group expects these resellers to refer their clients to Osirium's PAM solution in response.

 

The Group already has an exceptional reputation with its existing customers, which include blue-chip enterprises in defence, telecommunications and the financial services sector, and Osirium plans to continue expanding into new high growth sectors.

 

Summary and outlook

 

Osirium has a unique proposition and is building an increasingly strong pipeline of opportunities across a broad range of corporate sectors.  Since the year end, the funds raised in March 2018 will provide us with the capital to invest further in our sales, marketing, R&D and engineering teams to ensure the Group's momentum continues.  As the global cyber-security market continues to grow and with General Data Protection Regulation (GDPR) on the horizon, Osirium is well positioned and is sufficiently differentiated to take advantage of this opportunity. 

 

The Group has built strong foundations for the year ahead and we are confident of delivering significant progress as a result.

 

 

Simon Lee                                                                                                                 David Guyatt

Chairman                                                                                                                   Chief Executive Officer

23 April 2018                                                                                                             23 April 2018     

 

Financial review

 

Overview

For the twelve month period ended 31 December 2017, revenue was £647,580, an increase of 36% (compared with the 14 months ended 31 December 2016: £477,577).

 

Bookings for the twelve month period ended 31 December 2017, represented by total invoiced sales for annual subscriptions, were £876,323, an increase of 62% compared with the fourteen months ended 31 December 2016 where bookings were £540,836.  We have managed to increase significantly revenue and bookings despite a 2 month shorter accounting reporting period, demonstrating greater customer engagement and investment.

 

The twelve month loss before tax for the Group was £2,293,000, an increase from a loss of £1,812,843 for the fourteen month period to 31 December 2016.  The losses of the Group have increased following significant investment in increasing headcount and activity levels in our sales, marketing and engineering departments of the business.

 

Cash reserves were boosted by the recent fund raise that raised £4,200,000 gross cash in March 2018.

 

Revenue analysis

Revenue for the twelve month period ended 31 December 2017 was £647,580 (2016: £477,577 - 14 month period).  Customer numbers more than doubled from 14 in the period ended 31 December 2016 to 30 in the year ended 31 December 2017 demonstrating the increasing sales momentum felt within the business as we add more customers.

 

Our deferred revenues as at 31 December 2017 were £505,000, compared to deferred revenues at the end of December 2016 of £276,000, helping provide a degree of visibility and certainty over our future revenues.

 

Taxation

The Group has benefited from the tax relief given on development expenditure, which has resulted in a research and development tax credit of £408,000 being claimed for the twelve month period to 31 December 2017, compared with £290,000 for the previous 14 month period to 31 December 2016.  This further demonstrates the investment made in the Company's innovative cyber-security products.

 

Loss per share

Loss per share for the 12 month period on both a basic and fully diluted basis was 18p. In the prior 14 month period the basic and diluted loss per share was 13p.

 

Results and dividend

The Directors are not recommending the payment of a final dividend (2016: £nil).

 

Research and development & capital expenditure

The Group spent £1,254,000 (2016: £755,000) on direct staff and contractor costs for research and development, of which all was capitalised in both periods.  

 

This expenditure relates to the development of new and enhanced software offerings. The Group invests in new product development and the continual modification and improvement of its existing products to meet technological advances, customer and new market requirements of the fast paced cyber-security market.

 

Future developments

The Group has embarked upon a strategy which will extend its activities to the provision of cyber-security services into new areas such as financial services and critical national infrastructure and other market sectors as the need for Osirium's software is sector agnostic, in addition to developing its activities outside of the UK.

 

Cash flow

The Group's Cash balances at 31 December 2017 were £1,023,811 (2016: £3,572,794).  Net cash from operating activities for the period was £1,232,558 (2016: 789,443).  Cash reserves were boosted by the recent fund raise that raised £4,200,000 gross cash in March 2018.

 

Key performance indicators

The Group's progress against its strategic objectives is monitored by the Board of Directors by reference to key performance indicators (KPIs).  Progress made is a reflection of the performance of the business since flotation and the Group's achievement against its strategic plans.

 

The Group's major financial KPIs are bookings, revenue, new channel partners signed up, new customer acquisition, retaining and growing customer renewals, the number of proof of concepts and software evaluations installed, all of which have increased over the period.

 

Bookings are monitored on a monthly basis and reported in detail at board meetings.  Bookings have increased by 123% to £876,323 for the 12 month period to 31 December 2017 from £393,826 for the 12 months ended 31 December 2016.

 

As a result of the increase in booking, the revenue KPI is performing well, with total revenue up 63% to £647,580 (2016: £398,678), for the period under review.

 

Non-financial KPIs include new channel partners and, with a UK distributor and two overseas distributors signed up to date and a business development director appointed in Germany, the Board is pleased with this progress.  A further KPI is the retention of existing customers leading to the renewal of sales contracts.  All customers were retained in the period and 16 new customers added, with increasing contract values from our existing customer base; further evidence that our stated 'land and expand' objective with customers is working.  Proof of concepts have also increased now that the Group has more resources to support this activity, not only in the UK but with our fledgling partners overseas.

 

During the year and after the year end, we signed up Progress Distribution as a distributor in the UK and Spectrami in MENA and CHJ Technologies in Singapore, for further details please see the Chairman and Chief Executive's statement.  The Group did not lose a customer during the period and each significant renewal was at a higher level than the year before.  With the increases in sales and marketing and market awareness, the number of proof of concepts being demanded is increasing, not only in the UK, but also in our identified overseas markets.

 

The Group also measures and monitors brand recognition and momentum increases in the Osirium name as we continue to build a global brand. Brand recognition includes monitoring Osirium's Search Engine Optimisation Position and quarterly growth in qualified sales leads with a quantified 'call to action'.

 

Risks and uncertainties

Apart from the normal commercial and economic risks facing any UK based business looking to not only become the dominant company in its home market, but also expand into overseas territories, the major risks to the Group are the:

•            loss of a major client and supporter

•            loss of a relationship with a major supplier; and

•            development of new technologies which may adversely impact the Group's proprietary  software

 

In order to mitigate these risks, the Group:

•            has specific relationship management systems in place for managing both new and existing client and supplier relationships; and

•            undertakes research and development into various technologies on an ongoing basis.

 

Other risks include:

 

Competitor risk

The market for cyber-security software is becoming increasingly competitive.  To mitigate against this risk, management feel that the years of investment ahead of the maturing Privileged Access Management market and the continued investment in the product will maintain Osirium's leadership position in this market.

 

Commercial relationships

The Osirium software products are developed and released using open source.  To mitigate against this risk all elements and components used within the software are kept under constant review.  The Group continues to expand the various sales channels and reseller network, so that the Group is not dependent on any one partner.

 

Personnel/key executives

The Group's future performance is substantially dependent on the continued services and performance of its Directors and senior management plus its ability to attract and retain suitably skilled and experienced personnel in the future.

 

Although certain key executives and personnel have joined Osirium since flotation, there can be no assurance that the Group will retain their services.  The loss of any key executives or personnel may have a material adverse effect on the business, operations, relationships and/or prospects of the Group.

 

The Company believes that it has the appropriate incentivisation structures to attract and retain the calibre of employees necessary to ensure the efficient management and development of the Group. However, any difficulties encountered in hiring appropriate employees and the failure to do so may have a detrimental effect on the trading performance of the Group.  The ability to attract new employees with the appropriate expertise and skills cannot be guaranteed.

 

 

 

Customer attraction, retention and competition

The Group's future success depends on its ability to increase sales of its products to new prospects. The rate at which new and existing end customers purchase products and existing customers renew subscriptions depends on a number of factors, including the efficiency of the Group's products and the development of the Group's new offerings, as well as factors outside of the Group's control, such as end customers' perceived need for security solutions, the introduction of products by the Group's competitors that are perceived to be superior to the Group's products, end customers' IT budgets and general economic conditions.  A failure to increase sales due to any of the above could materially adversely affect the Group's financial condition, operating results and prospects.  The Group's success depends on its ability to maintain relationships and renew contracts with existing customers and to attract and be awarded contracts with new customers. A substantial portion of the Group's future revenues will be directly or indirectly derived from existing contractual relationships as well as new contracts driven at least in part by the Group's ability to penetrate new partners, verticals and territories. The loss of key contracts and/or an inability to successfully penetrate new verticals or deploy its skill sets into new territories could have a significant impact on the future performance of the Group.  

 

Reputation        

The Group's reputation, regarding the service it delivers, the way in which it conducts its business and the financial results which it achieves, are central to the Group's future success.

 

The Group's services and software are complex and may contain undetected defects when first introduced, and problems may be discovered from time to time in existing, new or enhanced product iterations.  Undetected errors could damage the Group's reputation, ultimately leading to an increase in the Group's costs or reduction in its revenues.

 

Other issues that may give rise to reputational risk include, but are not limited to, failure to deal appropriately with legal and regulatory requirements in any jurisdiction (including as may result in the issuance of a warning notice or sanction by a regulator or an offence (whether, civil, criminal, regulatory or other) being committed by a member of the Group or any of its employees or directors), money-laundering, bribery and corruption, factually incorrect reporting, staff difficulties, fraud (including on the part of customers), technological delays or malfunctions, the inability to respond to a disaster, privacy, record-keeping, sales and trading practices, the credit, liquidity and market risks inherent in the Group's business.

 

Further reputational risks include failure to meet the expectations of the customers, operators, suppliers, employees and intellectual property and technology. The Group's technology is primarily comprised of software and other code ("Software").  Some of the Software has been developed internally and is owned by the Group.  Also, some of the Software has been developed by third parties that have licensed rights in the Software to the Group or provided access under free and open source licence. However, a significant proportion of the Software has been developed by third parties and is provided to the Group under licence. It is not uncommon for any company's technology, particularly where it is primarily embodied in Software, to comprise both owned and licensed code. This nevertheless means that the Group's continuing right to use such Software is dependent on the relevant licensors continuing to licence Software to the Group.  Again, as is usual, such agreements may be terminated by the licensors due to a breach of their terms by the Group.  

 

Any failure by the Group to comply with the terms of the licences granted could, therefore, result in such licences being terminated and the Group no longer being entitled to continue to use the Software in question. Also, use outside of the terms of any relevant licence could expose the Group to legal action for infringement of the rights of the licensor(s).

 

Further, and in any event, the Group may not have adequate measures in place to ensure that its use of third party software complies with all terms under which such software has been licensed to the Group.

  

Operations

The Group's facilities could be disrupted by events beyond its control such as fire and other issues. The Group undertake nightly back ups in 'the cloud' and prepares recovery plans for the most foreseeable situations so that its business operations would be able to continue.

 

This strategic report was approved by the board on 23 April 2018

 

Rupert Hutton

CFO

23 April 2018

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

14 month

 

 

 

 

 

 

 

 

Year ended

 

Period ended

 

 

 

 

 

 

 

 

31-Dec-17

 

31-Dec-16

 

 

 

 

 

 

Notes

 

£

 

£

 

CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

647,580

 

477,577  

 

Administrative expenses

 

 

 

 

(2,944,394)

 

(2,300,074)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

 

 

 

 

(2,296,814)

 

(1,822,497)

 

Finance income

 

 

 

 

 

4,190 

 

9,654

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE TAX

 

 

 

 

 

(2,292,624)

 

(1,812,843)

 

Income tax credit

 

 

 

2

 

409,421

 

453,288

 

LOSS FOR THE PERIOD ATTRIBUTABLE TO

 

 

 

 

 

 

 

THE OWNERS OF OSIRIUM TECHNOLOGIES PLC

 

 

(1,883,203)

 

(1,359,555)

 

 

 

 

 

 

 

Loss per share from continuing operations:

 

 

 

 

 

Basic and diluted loss per share               

3

 

(18p)

 

(13p)

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

 

 

As at

 

As at

 

 

 

 

 

 

31-Dec-17

 

31-Dec-16

 

 

 

 

Notes

 

£

 

£

ASSETS

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

Intangible assets

 

 

4

 

1,731,856

 

1,134,452

Property, plant & equipment

 

 

 

80,168

 

44,315

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

622,619

 

380,891

Cash and cash equivalents

 

 

 

1,023,811

 

3,572,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,646,430

 

3,953,685

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

 

3,458,454

 

5,132,452

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Trade and other payables

 

 

 

857,734

 

648,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

857,734

 

648,530

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

Deferred tax

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

 

 

857,734

 

648,530

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

SHAREHOLDERS EQUITY

 

 

 

 

 

 

Called up share capital

 

5

 

103,944

 

103,944

Share premium

 

 

 

 

5,008,619

 

5,008,619   

Share option reserve

 

 

 

337,559

 

337,559

Merger reserve

 

 

 

 

4,008,592

 

4,008,592

Retained earnings

 

 

 

 

(6,857,994)

 

(4,974,792)

 

 

 

 

 

 

 

 

 

TOTAL EQUITY ATTRIBUTABLE TO THE

 

 

 

 

 

OWNERS OF OSIRIUM TECHNOLOGIES PLC

 

 

2,600,720

 

4,483,922  

 

 

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

3,458,454

 

5,132,452  

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

Called up

 

 

 

 

 

 

 

Share

 

 

 

 

 

share

 

Retained

 

Share

 

Merger

 

option

 

Total

 

 

 

capital

 

earnings

 

premium

 

reserve

 

Reserve

 

equity

 

 

 

£

 

£

 

£

 

£

 

£

 

£

Balance at 12 November 2015

65,482

 

(3,615,237)

 

 

4,008,592

 

240,662

 

699,499

Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

38,462  

 

 

5,961,537  

 

-

 

 

5,999,999

Issue costs

 

 

 

 

(952,918) 

 

 

 

 

 

 

Total comprehensive loss

 

(736,006)

 

 

 

 

 

(1,359,555)

Share option charge

 

 

 

 

 

96,897

 

96,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2016

103,944

 

(4,974,792)

 

5,008,619

 

4,008,592  

 

   337,559 

 

 4,483,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

-

 

 

-

 

 

 

-

Issue costs

 

 

 

-

 

 

 

-

Loss for the period

 

(1,883,202)

 

 

 

 

(1,883,202)

Share option charge

 

 

 

 

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2017

103,944

 

(6,857,994)

 

5,008,619

 

4,008,592

 

337,559

 

2,600,720

                             

 

CONSOLIDATED STATEMENT OF CASHFLOWS

 

 

 

 

 

 

 

Year

 

14 month

 

 

 

 

 

 

ended

 

Period ended

 

 

 

 

 

 

31-Dec-17

 

31-Dec-16

 

 

 

 

  Notes

 

£

 

£

Cash flows from operating activities

 

 

 

 

 

Cash used in operations

6

 

(1,523,979)

 

(909,873)

Interest paid

 

 

 

 

 

-

Tax received

 

 

 

 

291,421

 

120,430

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(1,232,558)

 

(789,443)

 

 

 

 

 

 

 

 

 

Cash flows used in activities

 

 

 

 

 

Purchase of intangible fixed assets

 

 

(1,254,268)

 

(915,476)

Purchase of tangible fixed assets

 

 

(66,347)

 

(52,508)

Interest received

 

 

 

 

4,190

 

9,654  

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(1,316,425)

 

(958,330)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Share issue (net of issue costs)

 

 

-

 

5,047,081

 

 

 

 

 

 

 

 

 

Net cash from financing activities

 

 

-

 

5,047,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase/(decrease) in cash and cash equivalents

 

(2,548,983)

 

3,299,308

Cash and cash equivalents at beginning of period

 

3,572,794

 

273,486

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

 

1,023,811

 

3,572,794

 

 

Osirium Plc is a company incorporated in the United Kingdom under the Companies Act 2006 and listed on the AIM market. The address of the registered office is One Central Square, Cardiff, CF10 1FS.

 

1.   SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Boards ("IASB") that are effective or issued and early adopted as at the time of preparing these Financial Statements and in accordance with the provisions of the Companies Act 2006.

 

Merger Accounting

On 6 April 2016 Osirium Technologies PLC acquired Osirium Limited. This transaction did not meet the definition of a business combination as set out in IFRS 3. It is noted that such transactions are outside the scope of IFRS 3 and there is no other guidance elsewhere in IFRS covering such transactions. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, requires that where IFRS does not include guidance for a particular issue, the directors may also consider the most recent pronouncement of other standard setting bodies that use a similar conceptual framework to develop accounting standards when developing an appropriate accounting policy. In this regard, it is noted that the UK Accounting Standards Board has, in issue, an accounting standard covering business combinations (FRS 102 Section 19) that permits the use of the merger accounting principles for such transactions. The directors have therefore chosen to adopt these principles and the financial information has been prepared as if Osirium Limited had been owned and controlled by the company throughout the 14 month period ended 31 December 2016.

 

Accordingly, the assets and liabilities of Osirium Limited have been recognised at their historical carrying amounts, the results for the periods prior to the date the company legally obtained control have been recognised and the financial information and cash flows reflect those of Osirium Limited. The amount recognised in equity is based on the historical carrying amounts recognised by Osirium Limited. However, the share capital balance is adjusted to reflect the equity structure of the outstanding share capital of the company, and any corresponding differences are reflected as an adjustment to a merger reserve.

 

Internally-generated development intangible assets

An internally-generated development intangible asset arising from Osirium's product development is recognised if, and only if, Osirium can demonstrate all of the following:

·     The technical feasibility of completing the intangible asset so that it will be available for use of sale

·     Its intention to complete the intangible asset and use or sell it

·     Its ability to use or sell the intangible asset

·     How the intangible asset will generate probable future economic benefits

·     The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset

·     Its ability to measure reliably the expenditure attributable to the intangible asset during its development

 

Internally-generated development intangible assets are amortised on a straight-line basis over their useful lives.  Amortisation commences in the financial year of capitalisation. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.  The amortisation cost is recognised as part of administrative expenses in the statement of comprehensive income.

 

Development costs        -              20% per annum, straight line

 

Impairment of tangible and intangible assets

At each statement of financial position date, Osirium reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).  Where the asset does not generate cash flows that are independent from other assets, Osirium estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

 

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.  An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash- generating unit) in prior years.  A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.  

 

 

 

NOTES TO THE ACCOUNTS

 

2.   INCOME TAX

 

Analysis of tax income

 

 

 

 

 

 

 

 

 

 

Year

 

14 month

 

 

 

 

 

ended

 

Period ended

 

 

 

 

 

31-Dec-17

 

31-Dec-16

 

 

 

 

 

£

 

£

Current Tax:

 

 

 

 

 

 

Tax

 

 

 

 

(408,000)

 

(290,000)

Adjustment for prior year tax

 

 

(1,421)

 

 

 

 

 

 

 

 

 

Total current tax

 

 

 

(409,421)

 

(290,000)

Deferred tax

 

 

 

-

 

(163,288)

 

 

 

 

 

 

 

 

Total credit in the statement of

 

(409,421)

 

(453,288)

comprehensive income

 

 

 

 

For the period ended 31 December 2016 successful R&D tax claims were submitted and paid by HM Revenue & Customs. Management intend to submit similar claims for the period ended 31 December 2017 and future periods.

 

Factors affecting the tax income

Tax on the loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to losses of the group as follows:

 

 

 

 

 

 

Year

 

14 month

 

 

 

 

 

 

ended

 

Period ended

 

 

 

 

 

 

31-Dec-17

 

31-Dec-16

 

 

 

 

 

 

£

 

£

 

 

 

 

 

 

 

 

 

 

Loss before tax

 

 

 

(2,292,624)

 

(1,812,843)

 

Loss before tax multiplied by the applicable

 

 

 

 

Rate of corporation tax of 19% (2016: 20%)

(435,598)

 

(362,569)

 

Expenses not deductible for tax purposes

-

 

664

 

Unrelieved tax losses

 

 

437,019

 

361,905

 

R&D tax credit relief

 

 

408,000

 

290,000

 

Deferred tax

 

 

 

163,288

 

 

 

 

 

 

 

 

 

Income Tax Income

 

 

409,421

 

453,288

 

 

 

As at 31 December 2017 the group had unutilised tax losses of £4,086,939 (31 December 2016: £1,184,906) available to offset against future profits. A deferred tax asset has been recognised in respect of tax losses carried forward to the extent that it offsets the deferred tax liabilities in respect of research and development credits and accelerated capital allowances (see note 18).  

 

Factors affecting future tax charges

The UK corporation tax rate has reduced to 19% from 1 April 2017 and the UK Government has indicated that it intends to reduce the main rate of corporation tax to 17% from 1 April 2020.

 

3.   EARNINGS PER SHARE

 

 

 

 

 

 

 

Year

14 month

 

 

 

 

 

 

ended

Period ended

 

 

 

 

 

 

31-Dec-17

31-Dec-16

 

 

 

 

 

 

 

 

Weighted average no. of shares in issue

 

 

10,394,255

10,394,255

 

 

 

 

 

 

 

 

Weighted average no. of shares for the purposes of basic earnings per share

10,394,255

10,394,255

 

 

 

 

 

 

 

 

Effect of dilutive potential ordinary shares:

 

 

 

Share options

 

 

 

 

-

-

 

 

 

 

 

 

 

 

Weighted average no. of shares for the purposes of diluted earnings per share

10,394,255

10,394,255

 

 

 

 

 

 

 

 

Basic losses attributable to equity shareholders

 

(1,883,203)

(1,359,555)

 

 

 

 

 

 

 

 

Losses for the purposes of diluted earnings per share

(1,883,203)

(1,359,555)

 

 

 

 

 

 

 

 

Basic loss per share

 

 

 

(18p)

(13p)

 

 

 

 

 

 

 

 

Diluted loss per share

 

 

 

(18p)

(13p)

 

 

Earnings per share has been calculated using the following methodology:

 

Basic losses per share are calculated by dividing the losses attributable to ordinary shareholder by the number of weighted average ordinary shares during the period.

 

At 31 December 2017, there were 1,905,817 share options outstanding that could potentially dilute basic earnings or losses per share in the future, but are not included in the calculation of diluted losses per share because they are anti-dilutive for the periods presented.

  
 

 

4.   INTANGIBLE FIXED ASSETS

 

 

 

 

 

 

Development

 

 

 

 

 

Costs

 

 

 

 

 

£

Cost

 

 

 

 

 

At 1 November 2015

 

 

2,310,571

Additions to 31 December 2016

 

 

915,476

 

 

 

 

 

 

At 1 January 2017

 

 

3,226,047

 

 

 

 

 

 

Additions to 31 December 2017

 

1,254,268

 

 

 

 

 

 

Cost c/f as at 31 December 2017

 

4,480,315

 

 

 

 

 

 

Amortisation:

 

 

 

 

At 1 November 2015

 

 

1,517,315

Charge to 31 December 2016

 

 

574,280

 

 

 

 

 

 

At 1 January 2017

 

 

2,091,597

 

 

 

 

 

 

Charge to 31 December 2017

 

 

656,862

 

 

 

 

 

 

Amortisation as at 31 December 2017

 

2,748,459

 

 

 

 

 

 

Carrying Amount:

 

 

 

 

At 31 December 2016

 

 

1,134,452

 

 

 

 

 

 

At 31 December 2017

 

 

 

 

1,731,856  

 

 

All development costs are amortised over their estimated useful lives, which is on average 5 years.  This reflects management's best estimate of the period of time over which the group will benefit from the amounts capitalised.

 

Amortisation is charged in full in the financial year of capitalisation.

 

All amortisation has been charged to administrative expenses in the statement of comprehensive income and total comprehensive loss.

 

The Company had no intangible fixed assets as at 31 December 2017.

 

 

5.   CALLED UP SHARE CAPITAL

 

The company was incorporated on 3 November 2015 with 100 shares of 1p each. On 6 April 2016 6,548,102 1p shares were issued in consideration for the acquisition of Osirium Limited. On 15 April 2016 3,846,153 1p shares were issued on listing of the company on the AIM exchange at a price of £1.56 per share for a total consideration of £6m.

 

Allotted, issued and fully paid

 

 

 

 

 

 

 

 

 

 

 

Nominal Value £0.01 per share

No. of shares

 

£

 

 

 

 

 

 

 

On incorporation on 3 November 2015

100

 

1

Shares issued as consideration for Osirium Limited on 6 April 2016

6,548,102

 

65,481

Shares issued on listing on AIM Exchange on 15 April 2016

3,846,153

 

38,462

 

 

 

 

 

 

 

 

 

 

 

10,394,355

 

103,944

 

Voting rights

Shares rank equally for voting purposes. Each member will have one vote per share held.

 

Dividend rights

Each share ranks equally for any dividend declared.

 

 

6.   RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

 

 

 

 

 

 

Group

 

 

 

 

 

Year

 

14 month

 

 

 

 

 

ended

 

Period ended

 

 

 

 

 

31-Dec-17

 

31-Dec-16

 

 

 

 

 

£

 

£

Loss before income tax

 

 

(2,292,624)

 

(1,812,843)

Depreciation charges

 

 

30,494

 

14,632

Amortisation charges

 

 

656,862

 

574,280  

Share option charge

 

 

 

-

 

96,897

Finance costs

 

 

 

 

-

Finance income

 

 

 

(4,190)

 

(9,654)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,609,458)

 

(1,136,688)

 

 

 

 

(Increase)/decrease in trade and other receivables

(123,725)

 

(56,674)

Increase/(decrease) in trade and other payables

209,204

 

283,489  

 

 

 

 

 

 

 

 

Cash used in operations

 

(1,523,979)

 

(909,873)

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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