AFERIAN PLC

Earnings Release • May 31, 2024

National Storage Mechanism | Additional information

RNS Number : 5581Q

Aferian PLC

31 May 2024

AFERIAN PLC

("Aferian", the "Company" or the "Group")  

FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2023

Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions company, announces its results for the year ended 30 November 2023. 

Financial Key Figures

US$m unless otherwise stated	2023	2022	Change %
Total revenue	47.8	91.1	(48%)
-     Devices	21.3	67.0	(68%)
-     Software and services	26.6	24.1	+10%
Exit run rate Annual Recurring Revenue (ARR) (1)	14.7	18.7	(21%)
Statutory operating loss	(63.8)	(16.6)	(284%)
Statutory operating cash flow before tax	(4.9)	6.4	(177%)
Statutory basic loss per share (US cents)	(67.1)	(20.5)	(227%)
Adjusted operating (loss)/profit (2)	(6.1)	7.5	(181%)
Adjusted EBITDA (3)	1.6	14.6	(88%)
Adjusted operating cash flow before tax (4)	3.2	8.9	(64%)
Adjusted basic earnings per share (US cents) (5)	(8.5)	6.6	(217%)
Net (debt)/cash (5)	(6.1)	4.0	(252%)
Dividend per share (pence)	-	1.0	(100%)

Notes 

(1)	##### Exit annualised recurring revenue ("ARR") is annual run-rate recurring revenue as at 30 November
(2)	##### Adjusted operating profit is a non-GAAP measure and excludes amortisation of acquired intangibles, impairment of goodwill exceptional items and share-based payment charges
(3)	##### Adjusted EBITDA is calculated as operating loss before depreciation, interest, tax, amortisation, impairment of goodwill, exceptional items and employee share-based payment charges
(4)	##### Adjusted operating cash flow before tax is a non-GAAP measure and excludes cash paid/received in respect of exceptional items.
(5)	##### Adjusted basic earnings per share is a non-GAAP measure and excludes amortisation of acquired intangibles, impairment of goodwill, exceptional items and share-based payment charges.
(6)	##### Net (debt)/cash is a non-GAAP measure and is calculated as loans and borrowings net of cash and cash equivalents.

Financial Highlights

·      Total revenues have declined by $43.3m to $47.8m driven primarily by the reduction in volume of devices sold.

o Higher margin software and services revenue grew by 10% to $26.6m.

o Amid a tough macro-economic and changing competitive environment device revenues decreased by 68% to $21.3m.

·      Exit run rate Annual Recurring Revenue ("ARR") decreased by 21% to $14.7m due some 24i customer contracts ending at the back-end of 2023.

·      Statutory operating loss of $63.8m includes the recognition of a $48.9m non-cash impairment charge.

·      Adjusted operating loss of $6.1m. During FY2023 the Group took actions to reduce its annualized cost base by $12m. Further cost reduction actions have been taken in H1 2024, as previously announced.

·      The Group's inventory balance at 30 November 2023 was $5.1m, $4.1m lower than the prior year.

·      Net debt at 30 November was $6.1m (30 November 2022: net cash $4.0m). Post period end the Group has extended the term of its bank loan facilities to September 2025.

·      No final dividend proposed (FY2022: 1 pence/1.26 US cents).

FY23 Strategic and Operational Highlights  

·      24i

o 24i's robust, end-to-end SaaS video streaming platform enables all kinds of video content owners and distributors to monetise their content investments by quickly launching and efficiently managing attractive streaming services on all consumer devices.

o In 2023 24i's revenue grew by 12% as 24i launched new products strategically positioned to capitalise on the expansion of ad-funded streaming.

o First joint Amagi and 24i customer, US food and travel video streaming network Tastemade, launched in the year followed by Virgin Media.

o Now focused on driving profitability and cash generation over nominal revenue growth.

·      Amino

o Amino's managed video streaming devices and SaaS management platform enable Pay TV and Digital Signage operators to deliver their live, scheduled and on-demand content with the quality of service and level of support that consumers demand for their big-screen viewing experience.

o In 2023 Amino's revenue declined by 63% as customers delayed device orders, deferring capital expenditure post COVID-19 and throughout the continued cost-of-living crisis.

o Amino now refocused on:

§    Delivering higher quality, higher margin Pay TV streaming devices which can also be bundled with the Group's Software-as-a-Service ("SaaS") device management platform; and

§    Driving growth in its digital signage and enterprise video business selling into large integrators and via distributors.

o Cost base significantly reduced in line with decline in recorded and forecast PayTV device revenues.

o Successful reduction in inventory balance to $5.1m, with further reduction expected in 2024.

o Amino's SaaS device management platform, which enables PayTV operators to maintain quality of service and reduce cost, continued to gain traction and is now deployed by over 120 customers.

o Ongoing deployments of Digital Signage and Enterprise devices by new customers throughout the year.

Post period end update

·      Secured an extension to the Group's $16.5 million senior lending facilities to September 2025 as well as an extension to the Group's £1.125m term loan arranged by its largest shareholder Kestrel Partners LLP to January 2026.

·      Further actions to identify and deliver efficiencies in the Group's cost base in the first half of FY2024 have been undertaken.

·      As previously announced, following fourteen years of service, Donald McGarva will step down from his role as CEO and leave the Company in October 2024.

Current trading and outlook 

Although the 24i video streaming business has seen a decline in its ARR, following the cost reduction actions taken it is making progress in line with its focus on profitability and cash flow. It has also seen new customer deployments and multiple contract extensions being delivered in the first half of the year. Unfortunately, since 30 November 2023 there has been a further deterioration in the trading of the Amino business due to lower than expected orders for video streaming devices as customers have delayed purchasing decisions longer than anticipated. Although we have taken management actions to further reduce the Group's cost base in the first half of FY2024, we expect Group adjusted EBITDA for FY2024 to be lower than the FY2023 adjusted EBITDA of $1.6m (though still positive), and for this to be weighted into the second half of the financial year. Net debt at 31 March 2024 was $12.3m and is expected to be higher at 31 May 2024 reflecting the seasonal billing cycle of the Group and the costs of management actions taken in the first half to reduce the cost base and renegotiate the Group's loan facilities. Positively, the extension of the Group's loan facilities provides a stable financial platform on which the Group can move forward.

For further information please contact:  

Aferian plc	+44 (0)1954 234100
Mark Wells, Chairman Donald McGarva, Chief Executive Officer  Mark Carlisle, Chief Financial Officer
Investec plc (NOMAD and Broker)	+44 (0)20 7597 5970
David Anderson / Patrick Robb / Nick Prowting / Cameron MacRitchie

About Aferian plc  

Aferian plc (AIM: AFRN) is a B2B video streaming solutions company. Our end-to-end solutions bring live and on-demand video to every kind of screen. We create the forward-thinking solutions that our customers need to drive subscriber engagement, audience satisfaction, and revenue growth.

It is our belief that successful media companies and services will be those that are most consumer-centric, data driven and flexible to change. We focus on innovating technologies that enable our customers stay ahead of evolving viewer demand by providing smarter, more cost-effective ways of delivering end-to-end modern TV and video experiences to consumers. By anticipating technological and behavioural audience trends, our software solutions empower our customers to heighten viewer enjoyment, drive growth in audience share and ultimately their profitability.

Aferian plc has two operating companies: 24i, which focusses on streaming video experiences, and Amino, which connects Pay TV to streaming services. Our two complementary companies combine their products and services to create solutions which ensure that people can consume TV and video how and when they want it. Our solutions deliver modern TV and video experiences every day to millions of viewers globally, via our growing global customer base of over 500 service providers.

Aferian plc is traded on the London Stock Exchange's AIM stock market (AIM: symbol AFRN). Headquartered in Cambridge, UK, the Company has over 350 staff located in offices in San Francisco, Amsterdam, Helsinki, Copenhagen, Madrid, Porto, Brno, Buenos Aires, and Hong Kong. For more information, please visit  www.aferian.com .

Chairman's statement:

FY2023 posed significant challenges for Aferian. Unfavourable macro-economic conditions, coupled with a change in competitive environment, led to a substantial decrease in sales of Pay TV streaming devices compared to the previous year resulting in an impairment of a significant share of the Group's goodwill and intangible assets. In response to this decline, the Group has implemented substantial measures to reduce its cost base. With the backing of its shareholders and debt facility lenders, the Group continues to have access to adequate financial resources to execute its strategy. The key ambition remains to build a more predictable software-driven growth business.

Despite these challenging trading conditions, we remain optimistic about the long-term outlook for the video streaming sector, particularly where both Amino and 24i operate. The media and entertainment sector continues its migration from traditional broadcast distribution models such as cable and satellite to streaming as the preferred mode of video delivery, and the Enterprise and Digital Signage market is presenting significant new opportunities for Amino. Aferian has been at the forefront of this type of content delivery for over 25 years and the continued transition to streaming demonstrates a growing market opportunity for the Group. Aferian's strategy is to serve this growing market by leveraging its expertise and investments already made in its software capabilities. This will enable the Group to organically build a more predictable, software-driven growth business.

During the year, we have also continued to make excellent progress on our ESG commitments, as detailed in the latest iteration of our ESG report which was published in August 2023. This includes further progress on initiatives across our businesses to reduce the carbon footprint of our supply chain both in the delivery of video streaming software and devices. We have also continued to invest in our people through partnerships with local education organisations as well as our own internal leadership, training and graduate programmes to nurture future talent into the industry.

On 4 April 2023, Max Royde was appointed to the Board as a Non-Executive Director. Following the resignation of Stephen Vaughan on 27 April 2023, Max Royde took up the position of Chair of the Board's Remuneration Committee. Max is a managing partner at Kestrel Partners, an investment management company specialising in business-critical software companies, which has a beneficial holding in Aferian. On 31 August 2023, Allen Broome was appointed to the Board as a Non-Executive Director. Allen currently serves as the Chief Executive Officer at MediaKind, a prominent global media technology provider, after previously leading the research and development organisation for two years in the role of Chief Technology Officer. With a robust background in software development and a track record of spearheading transformative technological changes in the media industry, Allen brings valuable experience to the Board.

On 22nd April 2024 Aferian plc announced that, following fourteen years of service, Donald McGarva will step down from his role as CEO and leave the Company in October 2024. The Board would like to take this opportunity to thank Donald for his contribution to the Company and wish him well for the future.

A review of the composition of the Board is underway and the Company will make a further announcement once this has been completed.

The Board is not proposing a final Dividend (2022: 1.0 GBP pence/1.26 US cents per share) for this financial year in order to retain the capital available to the Group to pursue its strategy.

Mark Wells 

Chairman

30 May 2024

Chief Executive Officer's Review

Sales of Pay TV streaming devices in the year were significantly lower than the prior year at $21.3m, representing a decrease of 68% year-on-year. Whilst the video streaming device market continues to grow, particularly in the Enterprise Video and Digital Signage sector, the number of Pay TV devices shipped in the period was impacted by customers de-stocking in response to reduced lead-times and a more challenging competitive environment. This downturn within the Amino division's revenues has had a significant impact on Group results for the year resulting in a significant impairment to the Group's goodwill and intangible assets.

Continued demand experienced by the 24i division, which serves the video streaming market, meant the Group made progress in executing on its strategy to grow software and services revenue in this market. Software and services revenue for the year closed the year at $26.6m, a double-digit increase of 10% versus prior year.

Group revenue for the year was $47.8m, a decrease of 48% versus prior year. As a result, and to position ourselves better with our customers' changing needs, we took proactive steps to reduce the Group's cost base in both 24i and Amino during the year. These actions have generated c$12m of annualised cost savings for the Group. To position the Group for profitability in the second half of 2024, post year end we also completed further cost reduction programmes in early December 2023 and April 2024 which generated an additional c$6m of annualised cost savings.

Aferian secured additional cash funding by way of a loan arranged by the Group's largest shareholder of $1.3m on 31 May 2023. The Group also successfully raised $4.0m (before expenses) on 25 July 2023, through an issue of equity share capital to be used for general working capital purposes.

Positively, in April 2024, we secured an extension to the Group's $16.5m senior lending facilities to September 2025 as well as an extension to the Group's $1.3m term loan arranged by its largest shareholder Kestrel Partners LLP to January 2026.  Securing these extensions combined with the management actions taken to streamline the operations of the Group in the last twelve months now provides a stable financial platform on which the Group can move forward.

FY2023 KEY PERFORMANCE INDICATORS 

US$m unless otherwise stated	2023	2022	Change %
Total revenue	47.8	91.1	(48%)
Software & services revenue	26.6	24.1	+10%
Exit run rate Annual Recurring Revenue (ARR)	14.7	18.7	(21%)
Adjusted operating cash flow before tax	3.2	8.9	(64%)

Our key performance indicators demonstrate growth in software & services revenue (up 10%), although exit run rate Annual Recurring Revenue decreased by 21% to $14.7m due to some customer contracts ending at the backend of FY2023. The executive management team remain focused on reducing inventory levels and improving operating cash flows following the cost reduction actions taken and as trading improves in 2024.

OPERATIONAL REVIEW 

The Group has two operating divisions: 24i and Amino.

24i

24i's robust, end-to-end SaaS video streaming platform enables all kinds of video content owners and distributors to monetise their content investments by quickly launching and efficiently managing attractive streaming services on all consumer devices. These include mobile phones and tablets to Smart TVs and the managed devices provided by pay TV operators.

24i revenue analysis

US$m unless otherwise stated	2023	2022	Change %
Software and services	21.0	19.1	10%
Devices	0.4	-	n/a
Total revenue	21.4	19.1	12%
Exit ARR at 30 November	9.9	14.2	(32%)

In FY2023 revenue grew as 24i launched new products strategically positioned to capitalise on the expansion of ad-funded streaming, specifically targeting what is commonly referred to as Free Ad supported Streaming TV ('FAST') channels Today, thousands of these streaming-only TV channels are available on aggregation platforms worldwide.

In March 2023, we announced a partnership with global FAST experts, Amagi, in which 24i can support the owners of these channels to quickly launch their own streaming apps, build direct relationships with their consumers and develop new monetisation strategies. The first joint Amagi and 24i customer, US food and travel video streaming network Tastemade, launched their 24i-based apps followed thereafter by Virgin Media.

Other customer project wins in the year included Israeli Public Broadcaster, KAN, which used 24i's application framework and SaaS content management platform to launch a series of new Smart TV streaming applications with sophisticated new features such as personalisation in December 2022 to coincide with the FIFA World Cup. The 24i-powered app was downloaded more than 380,000 times during the tournament alone.

We proactively reduced the cost base of 24i as a result of further synergies identified from our prior M&A endeavours and the successful completion of product development. Regrettably, two significant customer contracts ending at the back end of FY2023 resulted in lower exit ARR revenue for 24i at 30 November 2023. Nonetheless, the demand for 24i's video streaming platform remains robust, and our past investments in sales and marketing are yielding positive outcomes.

Amino

Amino's managed video streaming devices and SaaS management platform enable Pay TV and Digital Signage operators to deliver their live, scheduled and on-demand content with the quality of service and level of support that consumers demand for their big-screen viewing experience.

Amino revenue analysis

US$m unless otherwise stated	2023	2022	Change %
Software and services	5.6	5.0	12%
Devices	20.9	67.0	(69%)
Total revenue	26.5	72.0	(63%)
Exit ARR at 30 November	4.7	4.4	7%

The significant decrease in Pay TV device revenues was due to customers delaying device orders, deferring capital expenditure post COVID-19 and throughout the continued cost-of-living crisis. Whilst we expect the impact of this to reverse in FY2024 we are also seeing increased competition from commoditised low margin Pay TV streaming devices. As a result, we anticipate that Amino's revenue will be lower than levels recorded in FY2023. We have already adjusted the Amino cost base in line with these revenue forecasts.

Having made the decision in early 2022 to invest in components and finished goods as a precautionary measure to mitigate supply chain risks linked to the COVID-19 pandemic, inventory in Amino at 30 November 2023 was $5.1m, $4.1m lower than prior year. As lead times reduce, we have taken the decision to also reduce inventory and anticipate inventory levels to reduce back towards 30 November 2021 levels (which were $2.6m) in 2024.

With Pay TV operators looking to maximise their own cost efficiencies, Amino's SaaS device management platform continues to gain traction in the market. This platform has now been deployed by over 120 Pay TV operators who use it to remotely maintain and upgrade devices located in consumer homes, ensuring they maintain a high level of service quality whilst also reducing customer support costs. Unlike previous generations of satellite and cable TV set-top-boxes, streaming devices can be posted to customers, self-installed and remotely managed, providing a major cost saving compared to the old model of an engineer home visit installation for every customer.

Encouragingly, we have witnessed ongoing advancements in the deployment of our digital signage devices. These devices play a crucial role in streaming information and entertainment content to digital displays across diverse settings, ranging from betting shops and stadiums to healthcare facilities, retail outlets, transportation hubs, and government facilities.

Notably, our digital signage devices have been successfully deployed in several international airports in India. Furthermore, one major betting shop operator is undertaking a migration of its services from legacy satellite delivery to next-gen low-latency IP video delivery by leveraging Amino digital signage devices throughout its shops in the UK and Ireland. This transition not only enhances the quality of service and reduces latency for an improved customer experience; but also results in significant operational cost savings driven by secure remote device management and control across an extensively distributed network.

Whilst the video streaming device market is forecast to continue to grow it has evolved with low-cost manufacturers meeting the needs of many pay TV operators who, whilst needing to upgrade their services to incorporate video streaming, remain focused on cost reduction. Therefore, to enhance profitability, Amino's focus will be on delivering value to its customers through:

·      delivering higher quality, higher margin Pay TV streaming devices which can also be bundled with the Group's Software-as-a-Service ("SaaS") device management platform. This SaaS device management platform is also integrated with third party devices and sold on a standalone basis; and

·      driving growth in its digital signage and enterprise video business selling into large integrators and via distributors.

CURRENT TRADING AND OUTLOOK

Although the 24i video streaming business has seen a decline in its ARR, following the cost reduction actions taken it is making progress in line with its focus on profitability and cash flow. It has also seen new customer deployments and multiple contract extensions being delivered in the first half of the year. Unfortunately, since 30 November 2023 there has been a further deterioration in the trading of the Amino business due to lower than expected orders for video streaming devices as customers have delayed purchasing decisions longer than anticipated. Although we have taken management actions to further reduce the Group's cost base in the first half of FY2024, we expect Group adjusted EBITDA for FY2024 to be lower than the FY2023 adjusted EBITDA of $1.6m (though still positive), and for this to be weighted into the second half of the financial year. Net debt at 31 March 2024 was $12.3m and is expected to be higher at 31 May 2024 reflecting the seasonal billing cycle of the Group and the costs of management actions taken in the first half to reduce the cost base and renegotiate the Group's loan facilities. Positively, the extension of the Group's loan facilities provides a stable financial platform on which the Group can move forward.

Donald McGarva  

Chief Executive Officer 

30 May 2024

Chief Financial Officer's Review

FINANCIAL OVERVIEW

Group revenue decreased by 48% to $47.8m from $91.1m in 2022, primarily driven by a significant decrease in the number of devices shipped during the financial year. This is due in part to macro-economic impacts and customer destocking activities prompted by reduced lead-times, following the accumulation of stock to navigate COVID-19 supply chain challenges.

On a revenue segment basis, sales of streaming devices were significantly lower than prior year at $21.3m (2022: $67.0m) representing a decrease of 68%. There was, however, a positive performance from our high-margin software and services revenue segment which grew by 10% to $26.6m (2022: $24.1m). However, exit ARR decreased by 21% and as a result we expect the software and services revenue to decrease in FY24. ARR is projected to grow from this lower base as new contract deployments continue.

The Group's gross profit margin of 52% was up 600 basis points on the prior year. Adjusted EBITDA*1 was $1.6m (2022: $14.6m), a decrease compared to prior year of 88% primarily driven by the fall in devices revenue. The 24i business improved adjusted EBITDA to $2.9m (2022: $0.7m). However, adjusted EBITDA in Amino decreased to $0.4m (2022: $15.8m) due to the significant reduction in reported device sales.

Throughout the year, proactive measures were implemented to reduce the Group's cost base through a targeted cost-reduction program. This initiative resulted in approximately c$12m of annualised cost savings for the Group of which c$8m were in operating costs and c$4m in capex spend. Central costs include expenses related to the Board, including executive directors, and costs associated with the Company's listing on the London Stock Exchange. These costs reduced by $0.1m to $1.7m, mainly driven by a reduction in Executive director salaries.

The Group reported a statutory operating loss of $63.9m (2022: $16.6m loss), after $0.1m (2022: $0.4m) share based payment charge, $48.9m (2022: $12.5m) impairment of goodwill and acquisition intangibles, $4.3m (2022: $6.7m) exceptional items and $4.4m (2022: $4.6m) amortisation of intangibles.

The net finance expense was $0.8m (2022: $0.3m), a tax credit of $1.2m (2022: $0.5m tax charge) leading to a loss after tax of $63.4m (2022: $17.4m).

*1 Adjusted EBITDA is calculated as operating loss before depreciation, interest, tax, amortisation, impairment of goodwill, exceptional items and employee share-based payment charges     

Exceptional Items

US$000s unless otherwise stated	2023	2022
Restructuring and associated costs	3,873	1,072
Refinancing and other costs	267	-
Credit relating to royalty costs recognised in prior years and subsequently renegotiated	-	(48)
Acquisition and one-off legal costs	-	432
Aborted acquisition costs	142	5,206
Exceptional items included in operating expenses	4,282	6,662
Other exceptional items
Impairment charge (further details in note 6)	48,905	12,488
Exceptional items included in total net finance income comprise the following charges/(credits):
Fair value adjustment of contingent consideration	(1,505)	403
Unwinding discount on contingent consideration regarding FokusOnTV (formerly Nordija) acquisition	278	(403)
Total exceptional items	51,960	19,150

RESEARCH & DEVELOPMENT COSTS

The Group maintained its commitment to research and development of new products with spend of $13.0m on R&D activities (2022: $13.8m) of which $5.4m was capitalised (2022: $7.8m). Management initiatives during the year have successfully reduced the Group's annualised operating cost base by c.$12m such that capitalised R&D is expected to be c. $2m in 2024.

NET FINANCE EXPENSE

Net finance expense stood at $0.8m (2022: $0.3m), which represented the interest charged on our borrowing facilities of $2.0m (2022: $0.5m), $0.0m interest charged on lease agreements (2022: $0.1m) in accordance with IFRS 16 (leases) and a $1.2m debit (2022: $0.4m credit) relating to the unwinding of the discount on contingent consideration.

TAXATION

The Group recognised a total tax credit of $1.2m (2022: $0.5m tax charge). The effective tax rate of 1.9%, was lower than the blended statutory corporation tax rate of 23% primarily due to operating losses and amortisation of acquisition intangible assets. The Group's net cash tax payment for the year was $0.4m (2022: $2.4m). The deferred tax liability as at 30 November 23 was $0.5m (2022: $1.1m) mainly reflects the unwinding of deferred tax on the acquisitions in prior years. The deferred tax asset recognised in the year was $0.3m (2022: nil).

CASH FLOW

A reconciliation of adjusted operating cash flow before tax to cash generated from operations before tax is provided as follows:

US$m unless otherwise stated	2023	2022
Adjusted operating cash flow before tax	3.1	8.9
Restructuring and associated other costs	(3.8)	(1.5)
Refinancing and other costs	(0.5)	-
Aborted acquisition costs	(3.9)	(1.0)
Cash generated from operations before tax	(4.9)	6.4

Adjusted operating cash flow*2 from operations was $3.2m (2022: $8.9m). The reduction in adjusted cash flow from operations was due in large part to a cash outflow from working capital of $2.6m (2022: $5.6m) mainly relating to a decrease in trade and other payables of $17.3m (2022: $0.2m increase). Effective management of working capital remains a pivotal focus area for the Group.

Exceptional cash flows in FY2023 comprised one-off costs of $8.2m (2022: $2.5m).

*2 Adjusted operated cash flow is calculated as cash flows from operations less cash paid/received from exceptional items

FINANCIAL POSITION

At 30 November 2023, the Group's net debt was $6.1m (2022: net cash $4.0m). The Group has a banking facility with Barclays Bank plc, HSBC plc, and Bank of Ireland of which the Group had drawn $10.6m at 30 November 2023 (2022: $7.5m). On 31 May 2023 the Group agreed with its existing loan facility providers to reduce the total available loan facility from $50m to $25.4m, with a further reduction of the facility to $16.5m. On 22 April 2024 Aferian plc secured an extension to its $16.5m multicurrency working capital facility, previously due to mature on 23 December 2024, to 30 September 2025.

In addition, on 31 May 2023, the Group secured a loan of $1.3m arranged by its largest shareholder, Kestrel Partners LLP. This loan is now repayable on 31 January 2026.

At 30 November 2023, the Group had equity of $22.3m (2022: $78.9m) and net current liabilities of $6.3m (2022: $1.4m). Net current assets excluding cash drawn under the banking facility is $4.3m (2022: $6.1m). Goodwill has reduced by $46.4m to $11.3m (2022: $56.3m), reflecting the $48.9m impairment charge across the Group together with foreign exchange translation movements. 

GOING CONCERN

These financial statements have been prepared on the going concern basis.

The Parent Company is a holding entity and as such its going concern is inter-dependent on the Group therefore its going concern assessment was performed as part of the Group's assessment.

The Directors have reviewed the Group's going concern position taking account of its current business activities and their future forecast performance. The factors likely to affect its expected future financial performance are set out in this Annual Report and include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and its exposure to credit and liquidity risks.

The directors have prepared a base case and severe but plausible downside cashflow forecasts for the Group covering a period of at least 12 months from the date of approval of the financial statements (being to June 2025). However, if the Group fails to deliver their plausible downside cashflow forecast, the Group could be unable to operate within its multicurrency working capital facility limits as a result of non-compliance with the financial covenants associated with its existing facilities (which were amended on 22 April 2024 when Aferian Plc secured an extension to its $16.5 million multicurrency working capital facility, previously due to mature on 23 December 2024, to 30 September 2025). In conjunction with this extension, the interest margin payable on the drawn amount of the facilities was increased to between 3% to 4.5% over SONIA (dependent on net leverage). In addition, the leverage, interest cover and fixed charge cover ratio covenants were removed, and the available liquidity covenant was relaxed. At the same time, the term of the Group's unsecured $1.3m term loan facility provided by certain funds managed by Kestrel Partners LLP was extended to 31 January 2026).

However, should the Group trade at a level below that of its severe but plausible downside forecast, it could be in breach of covenant compliance which will also have a direct impact on the Parent Company's going concern status, this indicates the existence of material uncertainty that may cast significant doubt on both the Group and Company's ability to continue as a going concern and therefore they may be unable to realise their assets and discharge their liabilities in the normal course of business.

However, the Directors consider that the Group and Parent Company will trade in a positive scenario and therefore deem it to be appropriate to prepare the financial statements on a going concern basis and the financial statements do not include the adjustments that would be required if the Group and Parent Company were unable to continue as a going concern.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board considers strategic, financial and operational risks and identifies actions to mitigate those risks.

DIVIDEND

The Board is not proposing a final Dividend for this financial year (2022: 1.0 GBP pence/1.26 US cents* per share).

* Average FX rate for the year was £1 : $1.26 in 2022.

Mark Carlisle

Chief Financial Officer

30 May 2024

Aferian Plc

Consolidated income statement

For the year ended 30 November 2023

	Notes	Year to 30 November 2023 $000s	Year to 30 November 2022 $000s
Revenue Cost of sales	3	47,821 (22,758)	91,127 (49,121)
Gross profit		25,063	42,006
Operating expenses Operating loss	3	(88,997) (63,934)	(58,603) (16,597)
Adjusted operating loss Share-based payment charge Impairment of goodwill and intangible assets Exceptional items Amortisation of acquired intangible assets	6 4 6	(6,269) (67) (48,905) (4,282) (4,411)	7,522 (407) (12,488) (6,662) (4,562)
Operating loss		(63,934)	(16,597)
Net finance expense		(764)	(313)
Loss before tax Tax credit/(charge)		(64,698) 1,196	(16,910) (512)
Loss after tax		(63,502)	(17,422)
Loss per share Basic loss per 1p ordinary share	5	(67.27c)	(20.48c)
Diluted loss per 1p ordinary share	5	(67.27c)	(20.48c)

All amounts relate to continuing activities.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Aferian plc

Consolidated statement of comprehensive income

For the year ended 30 November 2023

	Notes	Year to 30 November 2023 $000s	Year to 30 November 2022 $000s
Loss for the financial year		(63,502)	(17,422)
Items that may be reclassified subsequently to profit or loss: Net foreign exchange gain/(loss) arising on consolidation		2,750	(5,334)
Other comprehensive income/(expense)		2,750	(5,334)
Total comprehensive expenses for the financial year attributable to equity holders		(60,752)	(22,756)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Aferian plc

Consolidated statement of financial position as at 30 November 2023

Assets	Notes	2023 $000s		2022 $000s
Non-current assets Property, plant and equipment Right of use assets Intangible assets Trade and other receivables                   Deferred tax assets	6 7	239 1,117 29,273 184                                                   348		496 2,276 81,021 183-
		31,161		83,976
Current assets Inventories Trade and other receivables Corporation tax receivable Cash and cash equivalents	7	5,099 9,127 858 5,771		9,222 19,846 654 11,524
		20,855		41,246
Total assets		52,016		125,222
Capital and reserves attributable to equity holders of the Company Called-up share capital Share premium                                              Other equity Capital redemption reserve Foreign exchange reserve Merger reserve Retained earnings		1,822 43,425 (103)                                12 (5,971) 42,750 (59,638)		1,488 39,768 -                                   12 (8,722) 42,750 3,587
Equity attributable to owners of the parent		22,297		78,883
Liabilities Current liabilities Trade and other payables Lease liabilities Corporation tax payable Loans and borrowings	8	15,518 634 364 10,607		33,534 1,121 505 7,531
		27,123		42,691
Non-current liabilities Trade and other payables Lease liabilities Provisions Deferred tax liabilities	8	26 497 81 496		1,070 1,177 288 1,113
Loans and borrowings		1,496		-
		2,596		3,648
Total liabilities		29,719		46,339
Total equity and liabilities		52,016		125,222

The accompanying notes are an integral part of these condensed consolidated financial statements.

Aferian plc

Consolidated statement of cash flows

For the year ended 30 November 2023

	Notes	Year to 30 November 2023 $000s	Year to 30 November 2022 $000s
Cash flows from operating activities Cash generated from operations Corporation tax paid	9	(4,917) (423)	6,389 (2,360)
Net cash generated from operating activities		(5,340)	4,029
Cash flows from investing activities Purchases of intangible assets Purchases of property, plant and equipment Payment of deferred consideration Acquisition of subsidiaries net of cash acquired	6	(5,471) (56) (310) -	(7,635) (172) - (1,545)
Net cash used in investing activities		(5,837)	(9,352)
Cash flows from financing activities Proceeds from issue of new shares Lease payments Dividends paid Interest paid Repayment of borrowings Proceeds from borrowings		4,120 (940) - (1,945) (11,500) 15,615	523 (1,104) (3,256) (677) - 7,500
Net cash generated from financing activities		5,350	2,986
Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effects of exchange rate fluctuations on cash held		(5,827) 11,524 74	(2,336) 14,182 (322)
Cash and cash equivalents at end of year		5,771	11,524

The accompanying notes are an integral part of these condensed consolidated financial statements.

Aferian plc

Consolidated statement of changes in equity

For the year ended 30 November 2023

	Notes	Share capital $000s	Share premium $000s	Other equity $000s	Merger reserve $000s	Foreign exchange reserve  $000s	Capital redemption reserve $000s	Profit and loss $000s	Total Equity $000s
Shareholders' equity at 01 December 2021		1,484	39,249	-	42,750	(3,388)	12	23,857	103,964
Loss for the year Other comprehensive expense		- -	- -	- -	- -	- (5,334)	- -	(17,422) -	(17,422) (5,334)
Total comprehensive expense for the year attributable to equity holders		-	-	-	-	(5,334)	-	(17,422)	(22,756)
Share based payment charge Dividends paid Issue of share capital, net of issue costs		- - 4	- - 519	- - -	- - -	- - -	- - -	408 (3,256) -	408 (3,256) 523
Total transactions with owners		4	519	-	-	-	-	(2,848)	(2,325)
Total movement in shareholders' equity		4	519	-	-	(5,334)	-	(20,270)	(25,081)
Shareholders' equity at 30 November 2022		1,488	39,768	-	42,750	(8,722)	12	3,587	78,883
(Loss) for the year Other comprehensive expense		- -	- -	- -	- -	- 2,750	- -	(63,502) -	(63,502) 2,750
Total comprehensive (expenses) for the year attributable to equity holders						2,750	-	(63,502)	(60,752)
Share based payment charge Dividends paid Issue of share capital, net of issue costs Loan related convertible debt		- - 334 -	- - 3,657 -	- - - (103)	- - - -	- - - -	- - - -	278 - - -	278 - 3,991 (103)
Total transactions with owners		334	3,657	(103)	-	-	-	278	4,166
Total movement in shareholders' equity		334	3,657	(103)	-	2,750	-	(63,224)	(56,586)
Shareholders' equity at 30 November 2023		1,822	43,425	(103)	42,750	(5,972)	12	(59,637)	22,297

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

1   Basis of preparation

The financial information set out in this document does not constitute the Group's Annual Report (which includes the statutory financial statements) for the years ended 30 November 2023 or 2022.  The Annual Report (which includes the statutory financial statements) for the years ended 30 November 2022 ('2022') and 30 November 2022 ('2022'), which were approved by the directors on 30 May 2024, have been reported on by the Independent Auditors. The Independent Auditors' Reports on the statutory financial statements for each of 2022 and 2023 were unqualified, in both periods drew attention to a matter by way of emphasis, being going concern, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The Group's Annual Report (which includes the statutory financial statements) for the year ended 30 November 2022 have been filed with the Registrar of Companies.  The Annual Report (which includes the statutory financial statements) for the year ended 30 November 2023 will be delivered to the Registrar in due course, and will be available from the Parent Company's registered office at Botanic House, 100 Hills Road, Cambridge, England, CB2 1PH and on the Group's website https://aferian.com/investors/ .

The financial information set out in these results has been prepared using the recognition and measurement principles of and in accordance with UK adopted International Accounting Standards ('IFRS').  The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 30 November 2022, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2022. There are deemed to be no new standards, amendments, and interpretations to existing standards, which have been adopted by the Group that have had a material impact on the financial statements.

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

2   Going Concern

These financial statements have been prepared on the going concern basis.

The Directors have reviewed the Group's going concern position taking account of its current business activities and their future forecast performance. The factors likely to affect its expected future financial performance are set out in this Annual Report and include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and its exposure to credit and liquidity risks.

The directors have prepared a base case and severe but plausible downside cashflow forecasts for the Group covering a period of at least 12 months from the date of approval of the financial statements (being to June 2025). However, if the Group fails to deliver their plausible downside cashflow forecast, the Group could be unable to operate within its multicurrency working capital facility limits as a result of non-compliance with the financial covenants associated with its existing facilities (which were amended on 22 April 2024 when Aferian Plc secured an extension to its $16.5 million multicurrency working capital facility, previously due to mature on 23 December 2024, to 30 September 2025. In conjunction with this extension, the interest margin payable on the drawn amount of the facilities was increased to between 3% to 4.5% over SONIA (dependent on net leverage). In addition, the leverage, interest cover and fixed charge cover ratio covenants were removed, and the available liquidity covenant was relaxed. At the same time, the term of the Group's unsecured $1.3m term loan facility provided by certain funds managed by Kestrel Partners LLP was extended to 31 January 2026).

However, should the Group trade at a level below that of its severe but plausible downside forecast, it could be in breach of covenant compliance which will also have a direct impact on the Parent Company's going concern status, this indicates the existence of material uncertainty that may cast significant doubt on both the Group and Parent Company's ability to continue as a going concern and therefore they may be unable to realise their assets and discharge their liabilities in the normal course of business.

However, the Directors consider that the Group and Parent Company will trade in a positive scenario and therefore deem it to be appropriate to prepare the financial statements on a going concern basis and the financial statements do not include the adjustments that would be required if the Group and Parent Company were unable to continue as a going concern.

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

3   Segmental analysis

Operating segments are reported in a manner consistent with the internal reporting provided to the Aferian plc Chief Operating Decision Maker ("CODM") for the use in strategic decision making and monitoring of performance. The CODM has been identified as the Group Chief Executive and the Chief Financial Officer. The CODM reviews the Group's internal reporting in order to assess performance and allocate resources. Performance of the operating segments is based on adjusted EBITDA. Information provided to the CODM is measured in a manner consistent with that in the Financial Statements.

The Group reports three operating segments to the CODM:

·        the development and sale of video streaming devices and solutions, including licensing and support services ("Amino");

·        development and sale of the 24i end-to-end video streaming platform and associated services. This includes the results of 24iQ (formerly called the Filter) and FokusOnTV (formerly Nordija); and

·        central costs which comprise the costs of the Board, including the executive directors as well as costs associated with the Company's listing on the London Stock Exchange.

Revenues and costs by segment are shown below.

Aferian plc is domiciled in the United Kingdom.

2023		Amino $000s	24i $000s	Central costs $000s	Total $000s
Revenue
Software & services		5,588	20,970	-	26,558
Devices *		20,880	383	-	21,263
Total		26,468	21,353	-	47,821
Adjusted cost of sales		(16,433)	(6,325)	-	(22,758)
Adjusted gross profit		10,035	15,028	-	25,063
Adjusted operating expenses		(9,596)	(12,114)	(1,737)	(23,447)
Adjusted EBITDA		439	2,914	(1,737)	1,616
Exceptional items					(4,282)
Impairment of goodwill					(48,905)
Share based payment charge					(67)
Depreciation and amortisation					(12,298)
Operating loss					(63,935)
Net finance expense					(764)
Loss before tax					(64,698)
Additions to non-current assets: Capitalised development costs		1,060	4,313	-	5,373

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

3   Segmental analysis (continued)

2022		Amino $000s	24i $000s	Central costs $000s	Total $000s
Revenue
Software & services*		4,975	19,107	-	24,082
Devices *		67,045	-	-	67,045
Total		72,020	19,107	-	91,127
Adjusted cost of sales		(44,095)	(5,074)	-	(49,169)
Adjusted gross profit		27,925	14,033	-	41,958
Adjusted operating expenses		(12,170)	(13,370)	(1,846)	(27,386)
Adjusted EBITDA		15,755	663	(1,846)	14,572
Exceptional items
Cost of sales					48
Operating expenses					(6,710)
Impairment of goodwill					(12,488)
Share based payment charge					(407)
Depreciation and amortisation					(11,612)
Operating loss					(16,597)
Net finance expense					(313)
Loss before tax					(16,910)
Additions to non-current assets: Capitalised development costs		1,962	5,673		7,635

*  incorporating integrated software and associated accessories

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

4   Exceptional items

Exceptional items included in operating profit comprise the following charges/(credits):

	Year to 30 November 2023 $000s	Year to 30 November 2022 $000s
Credit relating to royalty costs recognised in prior years and subsequently renegotiated	-	(48)
Subtotal cost of sales	-	(48)
Restructuring and associated other costs Refinancing and other costs Acquisition and one-off legal costs Aborted acquisition costs	3,873 267 142 -	1,072 - 432 5,206
Subtotal operating expenses	4,282	6,710
Total exceptional items	4,282	6,662
Other exceptional items
Impairment charge of goodwill and intangible assets	48,905	12,488
Exceptional items included in total net finance income comprise the following charges/(credits):
Fair value adjustment of contingent consideration	(1,505)	403
Unwinding discount on contingent consideration regarding FokusOnTV (formerly Nordija) acquisition	278	(403)
Total net finance income - exceptional items	(1,227)	-

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

5   Earnings per share

	Year to 30 November 2023 $000s	Year to 30 November 2022 $000s
Loss attributable to ordinary shareholders	(63,502)	(17,422)
Exceptional items (see note 4) Impairment charge Share-based payment charges Finance income Amortisation of acquired intangible assets Deferred tax credit on acquired intangibles	4,282 48,905 67 (1,227) 4,411 (1,113)	6,662 12,488 407 (403) 4,562 (682)
(Loss)/profit attributable to ordinary shareholders excluding adjusting items	(8,177)	5,612
Weighted average number of shares (Basic)	94,400,906	85,070,688
Dilutive share options outstanding	758,819	1,545,606
Weighted average number of shares (Diluted)	95,159,725	86,616,294
Basic loss per ordinary share of 1p	(67.27)c	(20.48)c
Diluted loss per ordinary share of 1p	(67.27)c	(20.48)c
Adjusted basic loss per ordinary share of 1p	(8.66)c	6.60c
Adjusted diluted loss per ordinary share of 1p	(8.66)c	6.48c

The calculation of basic earnings per share is based on loss after taxation and the weighted average of ordinary shares of 1p each in issue during the year. The Company holds 1,482,502 (2022: 1,482,502) of its own shares in treasury and these are excluded from the weighted average above. The basic weighted average number of shares also excludes 242 (2022: 242) being the weighted average shares held by the EBT in the year.

The number of dilutive share options above represents the share options where the market price is greater than exercise price of the Company's ordinary shares.

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

6   Intangible assets

	Goodwill $000s	Customer relationships $000s	Trade names $000s	Intellectual Property $000s	Software licences $000s	Development costs $000s	Acquired platforms $000s	Total $000s
Cost
At 1 December 2021	69,527	21,124	2,488	390	1,641	48,771	17,155	161,096
Additions Acquisition of subsidiary Impairment Foreign exchange adjustment	- 1,586 (12,488) (2,333)	- 119 - (931)	- - - (94)	- - - -	- - - (160)	7,636 - - (1,220)	- 2,609 - (1,123)	7,636 4,314 (12,488) (5,861)
At 30 November 2022	56,292	20,312	2,394	390	1,481	55,187	18,641	154,697
Additions Impairment     Foreign exchange adjustment	- (46,409) 1,455	- (81) 579	- - 58	- - -	98 - 98	5,373 (1,296) 1,070	- (1,119) 684	5,471 (48,905) 3,944
At 30 November 2023	11,338	20,810	2,452	390	1,677	60,334	18,206	115,207
Amortisation
At 1 December 2021	-	10,066	1,843	390	1,638	39,323	11,972	65,232
Charge for the year Foreign exchange adjustment	- -	2,011 (217)	80 (43)	- -	3 (160)	5,363 (510)	2,471 (554)	9,928 (1,484)
At 30 November 2022	-	11,860	1,880	390	1,481	44,176	13,889	73,676
Charge for the year Foreign exchange adjustment	- -	1,556 165	81 31	- -	20 73	6,558 537	2,774 463	10,989 1,269
At 30 November 2023	-	13,581	1,992	390	1,574	51,271	17,126	85,934
Net book amount At 30 November 2023	11,338	7,229	460	-	103	9,063	1,080	29,273
At 30 November 2022	56,292	8,452	514	-	-	11,011	4,752	81,021

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

7   Trade and other receivables

	2023 $000s	2022 $000s
Current assets: Trade receivables Contract assets Other receivables Prepayments	6,336 1,006 792 993	16,627 1,191 400 1,628
Trade and other receivables	9,127	19,846
Corporation tax receivable	858	654
Current assets: due within one year	9,985	20,500
Non-current assets: Other receivables	184	183

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

8   Trade and other payables

	2023 $000s	2022 $000s
Current liabilities Trade payables Other payables Accruals	7,139 71 5,207	23,268 111 6,759
Total current financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost Contingent consideration	12,417 74	30,138 809
Total current financial liabilities measured at fair value Social security and other taxes Contract liabilities (Note 4)	74 687 2,340	809 301 2,286
Total trade and other payables Lease liabilities Corporation tax payable	15,518 634 364	33,534 1,121 505
	16,516	35,160
Non-current liabilities Other payables Lease liabilities	26 497	1,070 1,177
	523	2,247

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

9 Cash generated from operations

Cash generated from operations	Year to 30 November 2023 $000s	Year to 30 November 2022 $000s
Loss for the year Tax (credit)/charge Net finance costs Amortisation charge* Depreciation charge Impairment charge Loss on disposal of property, plant and equipment Share based payment charge Exchange differences Decrease/(increase) in inventories Decrease in trade and other receivables Decrease in provisions (Decrease)/increase in trade and other payables Increase in payables for aborted acquisition costs	(63,502) (1,196) 764 10,989 1,309 48,905 3 67 186 4,123 10,719 (2) (17,282) -	(17,422) 512 313 9,928 1,684 12,488 4 407 (1,451) (6,665) 2,283 (10) 246 4,072
Cash generated from operations	(4,917)	6,389

* Refer to note 6 for amortisation charge details

Adjusted operating cash flow before exceptional cash outflows was $3.2m (2022: $8.9m).

	2023 $m	2022 $m
Adjusted operating cash flow before tax	3,191	8,937
Restructuring and associated other costs	(3,778)	(1,504)
Refinancing and other costs	(475)	-
Aborted acquisition costs	(3,855)	(1,044)
Cash generated from operations before tax	(4,917)	6,389

Aferian plc

Notes to the condensed consolidated financial statements

For the year ended 30 November 2023

10 Cautionary Statement

This document contains certain forward-looking statements relating to Aferian plc (the "Group"). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Group to differ materially from those contained in any forward-looking statement. These statements are made by the Directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

11 Annual Report

Pursuant to AIM Rule 20, the Annual Report and Accounts for the financial year ended 30 November 2023 ("Annual Report") is available to view on the Group's website: www.aferian.com and will be posted to shareholders shortly. Aferian plans to hold a general meeting on meeting on 28 June 2023 where the Annual Report and accounts will be received with related resolutions to be considered.

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