8 June 2023

Idox plc

Half Year results for the six months ended 30 April 2023

Good first half performance, with encouraging organic growth and continued cash generation

 

Idox plc (AIM: IDOX, 'Idox', 'the Company' or 'the Group'), a leading supplier of specialist information management software and solutions to the public and asset intensive sectors, is pleased to announce its unaudited half year results for the six months ended 30 April 2023 ('H1 FY23').

 

Financial highlights

Revenue

·    Increased by 8% to £35.8m (H1 FY22: £33.2m).

·    Recurring revenues¹ increased by 7% to £21.2m (H1 FY22: £19.8m), accounting for 59% of the Group's total revenue (H1 FY22: 60%).

Profit

·    Adjusted² EBITDA increased by 10% to £12.1m (H1 FY22: £11.0m).

·    Operating profit increased by 16% to £4.9m (H1 FY22: £4.3m).

·    Adjusted² EBITDA margin improvement at 34% (H1 FY22: 33%).

·    Statutory operating profit margin improvement to 14% (H1 FY22: 13%).

·    Statutory profit before tax increased 13% to £4.1m (H1 FY22: £3.6m).

·    Adjusted³ diluted EPS for continuing operations increased by 10% to 1.33p (H1 FY22: 1.21p).

·    Statutory diluted EPS for continuing operations increased by 7% to 0.73p (H1 FY22: 0.68p).

Cash

·    Net cash⁴ at the end of the period of £1.1m (31 October 2022: net debt of £6.7m; 30 April 2022: net debt of £3.8m).

·   Cash generated from operating activities before taxation as a percentage of Adjusted EBITDA for total operations was 148% (H1 FY22: 122%).

·    Free cashflow⁵ generation up 84% at £12.9m (H1 FY22: £7.0m).

·    Significant resources in place to fund M&A, including £35m revolving credit facility and £10m accordion.

 

Operational highlights

·   Order intake of £52m, up 23% from H1 FY22.

·   New divisional structure fully embedded providing better market focus, customer service and sharper sales execution:

o  Land, Property & Public Protection (LPPP);

o  Assets; and

o  Communities.

·    Further innovation, development and rationalisation of the Group's product portfolio including the transition to Cloud.

·    Good progress on developing the Group's geospatial capabilities.

·    M&A pipeline remains attractive with positive leads on a number of complementary and accretive targets.

 

Current trading and outlook

·    Combination of strong recurring revenue and growing orderbook, provides good revenue visibility for the remainder of FY23 and into FY24.

·    The business continues to perform well and in line with the Board's expectations.

Intention to pay a final dividend in line with the Group's stated dividend policy

 

David Meaden, Chief Executive Officer of Idox said:

"The Group has delivered a good performance with double digit profit growth in a challenging macro-economic environment.

 

We have continued to secure both new clients and new contracts with key customers, which has resulted in significantly higher order intake, providing good visibility for the remainder of this year and going into next year.

 

Having ended the period with net cash, compared to net debt at the year end, we have the financial resources to continue to pursue complementary, value enhancing acquisition targets.

 

Overall, our current full year financial performance is expected to be in line with the Board's expectations reflecting our strong order intake and consistent operational execution."

 

 

There will be a webcast at 10:00am UK time today for analysts and investors. To register for the webcast please contact MHP at [email protected]

 

For further information please contact:

 

Idox plc	+44 (0) 870 333 7101
Chris Stone, Non-Executive Chair	[email protected]
David Meaden, Chief Executive Officer
Anoop Kang, Chief Financial Officer
Peel Hunt LLP (NOMAD and Broker)	+44 (0) 20 7418 8900
Paul Gillam
Michael Burke
James Smith
MHP	+ 44 (0) 20 3128 8276
Reg Hoare	[email protected]
Ollie Hoare
Matthew Taylor

 

About Idox plc

For more information see www.idoxgroup.com @Idoxgroup

 

 

Alternative Performance Measures

The Group uses these APMs, which are not defined or specified under International Financial Reporting Standards, as this is in line with the management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers.

¹ Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed service arrangements which involve a fixed fee irrespective of consumption.

² Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. Share option costs are excluded from Adjusted EBITDA as this is a standard measure in the industry and how management and our shareholders track performance (see note 11 for reconciliation).

³ Adjusted EPS excludes amortisation on acquired intangibles, restructuring, financing, impairment, share option and acquisition costs (see note 11 for reconciliation).

⁴ Net cash / debt is defined as the aggregation of cash, bank borrowings and the long-term bond (see note 11 for reconciliation).

⁵ Free cash flow is defined as net cash flow from operating activities after taxation less capital expenditure and lease payments (see note 11 for reconciliation).

 

Chair's statement

 

Introduction

I am pleased to introduce a strong set of results from Idox for the first half of the financial year. Building on the Four Pillars strategy and the three phases of Walk, Run, Fly, the business has focussed its activities on software and has delivered encouraging organic growth in the first half of the year against what continues to be a challenging macro-economic and geopolitical backdrop.

 

During the period, revenues grew by 8% and Adjusted EBITDA by 10%. The Group has continued to be focussed on cash generating activities, with cash generated from operating activities, before tax, being £18.0m, a conversion rate of 148% against an Adjusted EBITDA for the period of £12.1m. The period ended with the business eliminating its net debt position and returning to a positive cash position of £1.1m.

 

Effective from the beginning of the period, the business re-organised its activities around three divisions, Land, Property & Public Protection (LPPP), Assets and Communities. This has allowed for a clearer focus on growth, and it is a notable that each of the leaders in these areas, along with the appointed Head of Engineering have been graduates of the Idox Leading Together programme.

 

The Group is well placed to execute on our growth strategy. We are confident in the momentum being built in the business and this is supported by an increase in order intake over the period of 23%, with a strong pipeline underpinning our confidence in the medium term.

 

Where clients are extending their software engagements, we have seen an increased demand across our portfolio to provide technical support and managed services related to software that help overcome the challenges of staff recruitment and provide high availability services. The markets in which we operate have continued to evolve and we see demand for high quality software supporting complex business processes. We are also seeing ongoing interest in the surfacing of data held within systems to improve business processes and to inform strategic decision-making across supply eco-systems. The organisational changes I referenced are allowing us to assess and explore these opportunities more readily and we are ready to support future growth options with appropriate investment as may be required.

 

We continue to look for accretive, synergistic opportunities that support the long-term focus on software and complement the existing portfolio. We are confident that there are a range of opportunities that fit the key criteria we have defined, and whilst it is incumbent on the Board to exercise the necessary patience to ensure that we are delivering in the best long-term interests of shareholders, we look forward to adding further assets in due course. In support of our growth strategy, the focus on cash and paying down existing debt has put the business in a strong position and we have over £45m of available resources for selective acquisitions at the half year.

 

During the reporting period, we have undertaken work to report our progress in matters relating to ESG and enhanced our reporting on matters relating to diversity, equality, and inclusivity. In each of these areas our reporting is now illustrative of the attention the management team place upon these matters and the culture within the business that seeks to ensure that all stakeholders, foremost amongst these our employees, can be proud of the Company's work in this area. The Chief Executive's statement includes further information on our ESG related activities.

 

We are grateful to our clients for continuing to have confidence in Idox as a partner and to our colleagues for their hard work and dedication in making Idox the business it is today. We appreciate that they choose to spend their time and talents building our business and without their engagement and contributions these results would not be possible.

 

Dividend

As previously announced, the Group paid a dividend of 0.5p per share in April 2023 in respect of the year ending 31 October 2022. Our current policy is to only declare a final dividend and therefore, no interim dividend is proposed in respect of H1 FY23 (H1 FY22: £Nil). We will keep the level of future dividends under review in consideration of our financial position and our confidence in the future.

 

Board

There have been no changes to the Board in the period. I am satisfied that there is sufficient diversity in the Board structure to bring a balance of skills, experience, independence, and knowledge to the Group, however, I intend to keep this balance under review and continued assessment.

 

Summary

The Group has made good progress in the period, with the implementation of the new divisional structure facilitating double digit Adjusted EBITDA growth. We are well positioned to increase our portfolio through strategic M&A activity. The business continues to perform well and in line with the Board's expectations.

 

 

Chris Stone                                          

Chair of the Board                                                                                  

 

 

Chief Executive's statement

 

I am pleased to report on another period of strong performance as we continue to focus on software businesses that deliver great value to customers in our areas of expertise. Our solutions provide our customers with the ability to seamlessly manage complex operational, legislative, and regulatory issues.

 

Our 'Four Pillars' of Revenue expansion, Margin enhancement, Simplification and Communication are the foundation on which we continue to grow and operate the business.

 

A new divisional structure has been implemented in H1 FY23, providing better market focus, customer service and sharper sales execution. We are already seeing the benefits of cross-sell expansion within the customer base, through leveraging a single sales structure for complementary solutions from across the divisional portfolio, as evidenced by delivering encouraging organic revenue growth.

 

Our financial position remains strong and supports the addition of market expansion through the acquisition of complementary technology and recurring revenue, through carefully selected M&A, further extending Idox's position in our chosen markets.

 

Strong progress

During this reporting period, we have seen growth in Group revenues of 8%, with accompanying Adjusted EBITDA improving by 10% from £11.0m to £12.1m. Following strong cash generation, we have moved from a net debt position at 30 April 2022 of £3.8m to a net cash position of £1.1m at 30 April 2023.

 

Our strong operational cadence and financial position leaves Idox well placed for continued investment in our software operations and provides a secure position from which to accelerate growth.

 

Divisional performance

Land, Property & Public Protection

Sales order intake in Local Authority continued to rise, up 50% on the same period last year; this included a mix of new services and large contract extensions, securing future long-term revenues, including contracts with The City of Edinburgh Council & City of Wolverhampton Council - extending contracts for six & five years respectively and East Lothian Council & Harborough District Council, both choosing a provisioned hosting service for their existing software platforms.

 

Revenues in Idox Cloud were up in H1 FY23 by 40%, with order intake continuing to improve - up 28% on the same period last year, welcoming new customers like Conwy County Borough Council, Blaenau Gwent County Borough Council and Harrow Council.

 

Our recent acquisitions have continued to perform well; revenues in Exegesis were up 19% on a year over year basis, with the delivery of a number of large projects utilising our specialist geospatial expertise in land and conservation software. Aligned Assets order intake was also significantly up, 31% on H1 FY22, with significant wins with the Metropolitan Police Service and Cadent Gas, as our specialist address management tools gained further traction in near adjacent markets to our traditional public sector position.

 

Assets

Engineering Information Management (EIM) had a solid start to the FY23 campaign, with revenues up 15% when compared to the same period in FY22. New Fusion Live sales included KNPC through our partners in the Middle East, Ebla and VME Process Inc and Elecnor, as well as significant new work within the existing customer base.

 

CAFM (the Group's computer aided facilities management software) saw the launch of version 12, which helped increase sales order intake in the first half of FY23 to over 17% compared to the same period last year; revenues were also up in CAFM by 6% in H1.

 

The good performance in EIM and CAFM was partially offset by lower than anticipated revenues in Transport and iFit.

 

Communities

With no major elections events, across the UK or Malta, in the first half of FY23, Elections revenues and order intake were down on the previous period. However, this was a busy development period for work with the Department for Levelling Up, Housing and Communities ('DLUHC') and Central Government and an opportunity to prepare for what looks like a very busy FY24, which will include the introduction of Idox Elections Cloud Services, during an election year.

 

Revenue and order intake for our sexual health solution, Lilie, were up in H1 - 6% and 25% respectively, including a number of significant contracts extensions.

 

In the Database subscription businesses GrantFinder and ResearchConnect, revenues were up over 12% on the same period last year. Whilst GrantFinder order intake was down slightly, as pressure on discretionary spend came under pressure particularly in the Public Sector, ResearchConnect, which operates in the International Higher Education markets, had a very good H1. Following the launch of the new product version last year, order intake was up over 100% on the same period last year and we welcomed 14 new customers, mainly from across Northern Europe.

 

We also continued support for charities and organisations with incomes of less than £30,000 through the "My Funding Central" solution, providing free access to grants and funding information following the withdrawal of these services by the National Council Voluntary Organisation. We expect subscribers to these services to reach over 3,500 by the end of the financial year.

 

Social Care continued to show good growth throughout H1, particularly in our directory services solutions, with revenues up 15% for the period and order intake up 12%.

 

The 'Four Pillars' programme

Revenue expansion

During the period we demonstrated high resilience as a business and our core areas performed well. Our strong market positions allowed us to continue to sell more solutions and services to existing clients, in addition to welcoming new client accounts across the Divisions. Performance overall has been increased through improved sales execution and better integration across the Group, which in turn has delivered consistent margins and improved bottom-line performance.

 

Order intake across the Group for the six months ended 30 April 2023 continued to grow, helping to support the in-year revenue growth and build the future orderbook. In the period we secured c.£52m of total contract value, which increased by 23% when compared to same period last year.

 

Margin enhancement

As evidenced by our strong EBITDA performance we have continued to drive improved margin. Improved operational performance is driven through the Group organisational set-up including development, professional services and technical teams, working together creating scale and efficiencies. This approach provides opportunities for shared learning, improved technical capabilities and pooled resources providing additional support and scale across the Group.

 

Notably, during the period we continued to improve and increase our operations in India. Overall, we remain focussed on creating further opportunities for expansion and improved margin performance.

 

Simplification

We continue to invest in our internal processes and systems, this includes the improved integration of data across all aspects of the business bringing a consolidated view of all customers and activities.

 

Utilisation of the expanded sales capabilities has improved communications and the process of renewals and re-signs. This has created efficiencies in the organisation and improves the overall customer experience of working with Idox.

 

We continue to invest in improving and simplifying the process of data migration across all Idox solutions, simplifying the transition of on-premise legacy platforms to our latest cloud provisioned services. This provides quicker and more cost-effective transitions for all customers onboarding from both existing Idox legacy platforms as well as new customers to Idox.

 

Communication

As we operate in the modern world of hybrid working, we are working hard to provide an engaging and open environment for everyone. We have encouraged more regular face to face activities, where we feel that this encourages and improves collaborations particularly in areas of creativity and development.

 

We have a regular and open communication strategy with all colleagues across the business delivered through a variety of media and channels.

 

CEO broadcasts underpin our open communication approach and various colleagues from across the business contribute to providing a broad range of insights, opinions, and inputs, and always includes an opportunity for colleagues to ask open questions of the panel. Participation and contribution levels from colleagues remain very high for this type of engagement.

 

Personally, contributing to the selection and onboarding of new team members enables me to outline our culture and work at Idox and what our expectation levels are for each other. This approach helps to ensure that we maintain our culture and authenticity and our ambitions for both the business and individuals are fully aligned from the outset.

 

Responsible

Conducting business responsibly is core to Idox's business model and long-term strategic goals. The Board recognises the importance of our environmental and societal responsibilities, as we build a sustainable business which grows the value that our services and solutions, and lasting commercial relationships, and the positive benefits that these bring to the communities in which we operate. Our commitment is focused in four areas: our people, our communities, our environment, and our organisational responsibilities. These focus areas address the seven United Nations Sustainable Development Goals most relevant to Idox.

 

Our ESG steering committee (formed in FY21) has continued with its core responsibility of understanding and implementing our sustainable business practices a according to the material issues of our stakeholders, whilst monitoring its effectiveness and maintaining proper governance. This committee has sponsored further initiatives during the first half of FY23, maintaining our focus on Diversity, Equality and Inclusivity and the growing use of 'Employee Lounges' - small, cross business virtual meetings to discuss how these improvements should be made in the most effective way. The ESG steering committee has also supported a number of employee-led initiatives to raise funds in support of various charities and we continue to use our community days scheme to support good causes in our local communities. The payroll giving scheme continues to maximise the impact of employee's contributions. The workplace wellbeing sessions also continue to be very well received by members of the Idox team.

 

During the first half of FY23 we entered several social value partnerships with clients allied to the delivery of our products and services. We are delighted that these arrangements enable us to make a very real and direct contribution in the clients' local community.

 

Idox recognises the importance of environmental protection and is committed to operating its business responsibly. We operate an Environmental Management System accredited to BS EN ISO 14001:2015, participating in the Energy Saving Opportunities Scheme ('ESOS') and meeting the requirements of the Streamlined Energy and Carbon Reporting ('SECR') regulations. In FY22 we further improved our reporting of our Scope 1, 2 and 3 emissions disclosures within the Task Force on Climate-related Financial Disclosures ('TCFD') framework and for FY23 we will also report in line with the Financial Reporting Council's Thematic review of TCFD disclosures and climate in the financial statements.

 

In the first half of FY23 we have continued to drive initiatives such as introducing a scheme to incentivise employees to obtain an electric vehicle, when purchasing a new car. The ESG steering committee also monitors our ongoing carbon reduction initiatives to ensure we are meeting our targets, including maintaining disciplines on avoiding unnecessary travel by continuing to take advantage of virtual meetings and delivery of many of our services.

 

Outlook

Through the new divisional structure, we have outlined a clearer market focus and a clearer connection of future software development to the needs of customers. This has helped build sales order intake growth in H1 which underpins future growth and revenue security. Our Group operations across development, onboarding and customer engagement continue to leverage the scale of the Group and support our improving margin performance, which we believe will drive significant stakeholder value. The structure also provides a strong basis for the integration of the businesses that we acquire as part of our M&A strategy.

 

Our long-term strategy of providing software solutions both in the cloud and / or provisioned through our data centre services remains unchanged, this is built upon a commitment to deliver the transformational needs and requirements of the markets that we serve whilst growing recurring revenues.

 

We have a solid balance sheet and good cash generation, which provides a strong foundation to continue to pursue attractive acquisition opportunities that will be complementary to our existing portfolio of solutions. Overall, our current full year financial performance is expected to be in line with Board expectations reflecting our strong order book and consistent operational execution.

 

 

David Meaden

Chief Executive Officer                                        

 

 

Chief Financial Officer's review

 

The Group established a new divisional structure, effective from 1 November 2022. The new structure comprising, Land, Property & Public Protection (LPPP), Assets and Communities provides better market focus, customer service and sharper sales execution. In accordance with IFRS 8 Operating Segments, information is provided to the chief operating decision maker, the Board of Directors, on this basis. Accordingly, the Group has prepared its segmental disclosures in the same manner. In addition, the Group has re-presented comparative information in line with the new divisional structure. Revenue has increased 8% in the period to £35.8m (H1 FY22: £33.2m) with double-digit growth of 10% in Adjusted EBITDA to £12.1m (H1 FY22: £11.0m).

 

The following table sets out the Revenue and Adjusted EBITDA for each of the Group's segments.

 

		H1 FY23	H1 FY22	Variance
		£000	£000	£000	%
Revenue
LPPP		21,458	17,540	3,918	22%
Assets		7,177	6,819	358	5%
Communities		7,146	8,847	(1,701)	(19%)
Total		35,781	33,206	2,575	8%
Revenue Split
LPPP		60%	53%
Assets		20%	20%
Communities		20%	27%
Total		100%	100%
Adjusted EBITDA1
LPPP		7,735	6,217	1,518	24%
Assets		1,811	2,053	(242)	(12%)
Communities		2,557	2,720	(163)	(6%)
Total		12,103	10,990	1,113	10%
Adjusted EBITDA Margin Split
LPPP		36%	35%
Assets		25%	30%
Communities		36%	31%
- Total		34%	33%

 

¹ Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. See note 11 for reconciliations of the alternative performance measures.

 

Adjusted EBITDA increased by 10% to £12.1m (H1 FY22: £11.0m), delivering a slightly improved Adjusted EBITDA margin of 34% (H1 FY22: 33%). The improvement in Adjusted EBITDA benefitted from increased profitability in Local Authority and Cloud within LPPP which was up 24% as a whole. This was partially offset by a 12% reduction in Adjusted EBITDA in Assets, where improved profitability in EIM was more than offset by reductions in Transport and iFit. In addition, there was a 6% reduction in Adjusted EBITDA in Communities where improvements in Databases, Social Care and Lilie were more than offset by the anticipated reduction in Elections due to no significant elections in the first half of 2023.

 

We continue with our efforts to improve efficiencies through marginal gains across our sales, development, professional services and support activities, and leverage our common resources to drive higher margins through improved economies of scale.

 

Revenues

 

		H1 FY23	H1 FY22	Variance
		£000	£000	£000	%
Revenues
- Recurring (LPPP)		11,689	10,636	1,053	10%
- Recurring (Assets)		4,788	4,810	(22)	(0%)
- Recurring (Communities)		4,674	4,384	290	7%
		21,151	19,830	1,321	7%
- Non-Recurring (LPPP)		9,769	6,904	2,865	41%
- Non-Recurring (Assets)		2,389	2,009	380	19%
- Non-Recurring (Communities)		2,472	4,463	(1,991)	(45%)
		14,630	13,376	1,254	9%
		35,781	33,206	2,575	8%
- Recurring1		59%	60%
- Non-Recurring2		41%	40%

 

¹ Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed service arrangements which involve a fixed fee irrespective of consumption.

² Non-recurring revenue is defined as revenues without any formal commitment from the customer to recur on an annual basis.

 

Total recurring revenue increased by 7% in the period to £21.2m and remained stable at 59% of the Group's total revenue (H1 FY22: 60%). LPPP has seen an increase of 10% in recurring revenues to £11.7m driven by the core Local Authority and Cloud businesses as well as continued growth in the FY21 acquisitions. Recurring revenue within the Assets division has remained stable at £4.8m with growth in CAFM and iFit offset by modest reductions in EIM and Transport. Communities has improved by 7% driven by a good performance in Databases.

 

Non-recurring revenues have improved by 9% to £14.6m for the period and account for 41% of the Group's revenue. LPPP has benefitted from significant increases year on year in the Local Authority and Cloud businesses. EIM has seen an increase in non-recurring revenue, which has led to an increase in both the overall EIM and Assets positions and has offset a reduction in non-recurring revenue in both Transport and iFit. With no significant elections held in the period there has been a large, anticipated decrease in the Communities non-recurring revenue in the period, though this is partially offset within the other businesses in the division.

 

The Group's order intake for the period was up 23% on last year to £52m which provides good levels of revenue visibility for the remainder of the year and into FY24.

 

Profit before taxation

The following table provides a reconciliation between Adjusted EBITDA and statutory profit before taxation for continuing operations.

 

		H1 FY23	H1 FY22	Variance
		£000	£000	£000	%
Adjusted EBITDA		12,103	10,990	1,113	10%
Depreciation & Amortisation		(5,288)	(5,328)	40	(1%)
Restructuring costs		(329)	(119)	(210)	176%
Acquisition costs		(340)	(11)	(329)	2,991%
Financing costs		(28)	(30)	2	(7%)
Share option costs		(1,200)	(1,249)	49	(4%)
Net finance costs		(840)	(651)	(189)	29%
Profit before taxation		4,078	3,602	476	13%

 

The reported profit before tax for continuing operations was £4,078,000 (H1 FY22: £3,602,000).

 

Restructuring costs of £329,000 (H1 FY23: £119,000) relate to internal corporate restructuring, property related costs and redundancies.

 

Acquisition costs of £340,000 (H1 FY22: £11,000) relate to the final settlements in relation to the acquisition of LandHawk in FY22 and deferred consideration arrangements associated with the acquisitions of Aligned Assets and exeGesIS (acquired in FY21). A final £0.5m is due to be paid in connection with the Aligned Assets acquisition in June 23. This will conclude the cash payments associated with our previous acquisitions.

 

Financing costs of £28,000 (H1 FY22: £30,000) relate to professional fees incurred as part of the ongoing bank facility agreement.

 

Share option costs of £1.2m (H1 FY22: £1.2m) relate to the accounting charge for awards in the current and prior years under the Group's Long-term Incentive Plan.

 

Net finance costs are broadly in line with the prior year at £0.8m (H1 FY22: £0.7m).

 

The Group continues to invest in developing innovative technology solutions across the portfolio and has capitalised £3.4m of development costs during the period (H1 FY22: £3.1m). The increase in the period is primarily due to the impact of the FY22 acquisition (£0.1m), with the remaining £0.5m being driven by an increase in development work across the portfolio.

 

Taxation

The effective tax rate (ETR) for the period was 18% (H1 FY22: 17%) for total operations.

 

The main factors contributing to the difference between the statutory rate of 20% (blended rate: 19% from 01/11/2022 to 31/03/2023, and 25% from 01/04/2023 to 30/04/2023) and the ETR of 18% is due to tax relief on share options and research and development costs, partially offset by the impact of overseas tax rates and disallowable losses arising in the period.

 

Earnings per share and dividends

Basic earnings per share for continuing operations improved 7% to 0.75p (H1 FY22: 0.70p). Whilst the profit for the period is up 9%, the growth in the basic earnings per share is slightly lower due to a higher number of weighted average shares in issue compared to April 2022. Diluted earnings per share for continuing operations improved 7% to 0.73p (H1 FY22: 0.68p).

 

Adjusted basic earnings per share for continuing operations increased 10% to 1.36p (H1 FY22: 1.24p). Adjusted diluted earnings per share for continuing operations increased 10% to 1.33p (H1 FY22: 1.21p).

 

In line with H1 FY22 the Board does not propose an interim dividend in respect of the six months ended 30 April 2023. It will keep the level of future dividends under review in consideration of the Group's performance, financial position and overall confidence in the future, and expects to pay a final dividend.

 

Balance sheet and cashflow

The Group's net assets have increased to £69.5m compared to £67.4m at 31 October 2022. The constituent movements are detailed in the Group's consolidated Statement of Changes in Equity, which are summarised as follows:

 

	6 months to 30 April 2023 £000
Total Equity as per FY22 Financial Report	67,416
Share option movements	1,173
Equity dividends paid	(2,268)
Profit for the period	3,338
Exchange losses on translation of foreign operations	(162)
Total Equity as per H1 FY23 Financial Report	69,497

The Group continued to have good cash generation in the period. Cash generated from operating activities before taxation was £18.0m, and as a percentage of Adjusted EBITDA was 148% (H1 FY22: 122%). The Group typically operates on a negative working capital cycle. A significant part of the Group's contracts renew and re-sign during the first half of the year. As a result, billings and cash collections typically tend to be annually in advance in the first half of the year.

 

		H1 FY23	H1 FY22
		£000	£000
Net cashflow from operating activities after taxation		17,136	11,127
Capex		(3,785)	(3,588)
Lease payments		(423)	(509)
Free cashflow1		12,928	7,030

 

¹ Free cash flow is defined as net cash flow from operating activities after taxation less capital expenditure and lease payments (see note 11 for reconciliation).

 

Given the strong cash collection during the first half of the year, the Group ended the period with net cash of £1.1m compared to a net debt position of £6.7m at 31 October 2022. Net cash comprised cash of £23.7m less bank borrowings of £11.2m and the Maltese listed bond of £11.4m.

 

The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. The Group's total available facilities at 30 April 2023 consisted of a revolving credit facility of £35m and £10m accordion which continue to 18 June 2024, providing scope for select acquisitions. Refinancing of the Group's facilities is underway and expected to conclude well in advance of the end of the financial year.

 

 

Anoop Kang

Chief Financial Officer