03 December 2021

Mind Gym PLC

("Mind Gym", the "Group" or the "Company")

Half year results for the six months ended 30 September 2021

Strong increase in digitally enabled revenues and gross margin compared to pre-COVID

Mind Gym (AIM: MIND), the global provider of human capital and business improvement solutions, announces its half year results for the six months ended 30 September 2021.

Key Financials

¹Digitally enabled revenue comprises revenue from our digital products and revenue from delivery of virtual sessions.

²Adjustments include restructuring costs in FY21. A reconciliation of these adjustments is shown in Note 6.

³ Adjustments have been updated to exclude share-based payments, in line with the presentation of FY21 results. As a result, the adjusted figures for the six months ended 30 September 2019 have been restated to provide a direct comparative.

⁴FY20 dividend of 0.9p reflects interim dividend only and no final dividend.

⁵ Adjusted EBITDA cash conversion defined as Adjusted cash generated from operations/Adjusted EBITDA.

Overview

·      Revenue bounced back to ahead of pre-COVID levels at £24.1m, up by 67% (76% in constant currency) on prior year and 1% (7% on a constant currency basis) on the same period two years ago.

·      Digitally-enabled revenue increased 175% on pre-COVID levels to £19.5m, (H1 FY20: £7.1m) to represent 81% of total revenue (H1 FY20: 30%), reflecting growth in both digital products and live virtual deliveries:

o  Existing on demand digital product revenue grew by 44% to £2.7m (£1.9m) to represent 11% of total revenue (H1 FY20: 8%).

o  Live virtual deliveries grew by 224% to £15.9m, whilst face to face delivery has been limited by COVID restrictions H1 FY20: £4.9m)

o  Strong feedback reflected in a 2% increase in participants rating courses as "Excellent" to 54% (H1 FY 20: 52%).

·      Our new digital 1:1 coaching platform "Performa", which delivers high impact, precision coaching at scale using a proprietary methodology, will launch in the New Year, with a first client already signed up and with strong prospective interest. Our second new digital product, DXP (Digital Content Experience) will launch in FY23, as we focussed resource on Performa whilst actively seeking to recruit further digital expertise.

·      Innovation investments include:

o  Our new DEI white paper "The Inclusion Solution" and associated products launched in H1 FY22, with DEI accounting for 35% of revenues (H1 FY21: 19%, H1 FY20: 13%).

o  Hybrid working webinars with supporting products available in H2 FY22.

o  Our new point of view on leadership development was launched at the recent CHRO summit to critical acclaim.

o  Our new point of view on wellness is on track to launch in H2 FY22.

o  Academic Board boosted with new members; Tessa West, PhD, and Dr Jay Van Bavel.

·      Repeat revenue⁶  represented 92% of Group revenue, returning to pre-COVID levels (H1 FY21: 87%, H1 FY20: 92%).

·      Gross margin increased by 7.1 percentage points from H1 FY20 to 85.9% due to higher digital and virtual revenues.

·      Adjusted² profit before tax of £17k (H1 FY20: £3.9m) in line with full year expectations as we continue to reinvest,

·      Cash balance remains strong at £12.0 million (H1 FY21: £14.5m) due to continued working capital improvements, supporting a further £2.8m of capital investment, of which £2.4m related to new digital products in H1 FY22.

·      In line with our strategy to focus on investing in digital for future growth, no interim dividend will be paid.

⁶Repeat revenue is defined as revenue from clients that have purchased products during a comparative period in one or more of the previous three years.

Separately announced today

Mind Gym is also pleased to announce the appointment of Dominic Neary to the Board with effect from today and that he will assume the role of Chief Financial Officer of the Company from 1 January 2022. Dominic will be replacing Richard Steele who has been the Chief Financial Officer of Mind Gym since before its IPO in 2018. Dominic brings a wealth of relevant experience gained from senior finance roles at high growth digital and international companies. The Board wishes to express its gratitude and appreciation to Richard for the significant role he has played in the Company's growth and development and wishes him all the best for the future.

Current Trading & Outlook

The second half of the year has continued to see growth on FY20. We expect revenues to continue to increase on pre-COVID levels as we maintain our investment strategy to deliver long-term, sustainable growth with our first new digital product, Performa launching in Q4 FY22 and our new digital platform, DXP, which is in the middle of Beta trials, to be launched in FY23.  We face uncertainty as we enter Q4 with an increase in reported rates of COVID infections and the possible impact of the Omicron variant which may affect client decision making. Nonetheless, Mind Gym has demonstrated significant adaptability and resilience to date and remains focused on the delivery of its leading client solutions. Our expectations for the full year therefore remain broadly unchanged.

Octavius Black, Chief Executive Officer of Mind Gym, said:

"I am delighted to see the bounce back of revenue ahead of pre-COVID levels. Our digital strategy remains on track and our clients' responses to the first of our new digital products, Performa, are extremely positive. COVID still presents challenges which may impact buying including the "Great Resignation", a potential return to lockdown which has already begun in some European countries and inflationary pressure. However, we have demonstrated our ability to continue to grow revenues in a virtual world with a strong digitally enabled proposition, and Mind Gym remains well placed to adapt and prosper in the vast, growing and rapidly evolving corporate change, learning and wellness market."

Enquiries:

About Mind Gym

Mind Gym is a company that delivers business improvement solutions using scalable, proprietary products which are based on behavioural science. The Group operates in three global markets: business transformation, human capital management and learning & development.

Mind Gym is quoted on the London Stock Exchange Alternative Investment Market (ticker: MIND) and headquartered in London. The business has offices in London, New York and Singapore.

Further information is available at www.themindgym.com

Half Yearly report

Business overview

As H1 FY21 was impacted by COVID-19, performance is mainly compared to H1 FY20

Revenues in the first six months to 30 September 2021 increased 7% in constant currency on pre-COVID levels compared to the same period two years ago. The strengthening of sterling meant the actual reported revenue increase was 1%. There was a greater recovery in the US (+12%) where the leadership and other investments are more advanced than in EMEA where revenues increased 1%.

Repeat revenue remained strong at 92% (H1 FY20: 92%) and we continued to be well diversified across many sectors, led by technology, financial services and pharma.

Revenue from the Group's top 25 clients contributed 47% of revenue which was in line with the 46% seen for the same period in FY20 as we returned to delivering larger sized projects.

Digitally-enabled revenue increased 175% on pre-COVID levels to £19.5m, (H1 FY20: £7.1m) to represent 81% of total revenue (H1 FY20: 30%). Existing on demand digital product revenue grew by 44% to £2.7m (£1.9m) to represent 11% of total revenue (H1 FY20: 8%). Live virtual deliveries grew by 224% to £15.9m with only 3% returning to face to face delivery. Our feedback scores continue to give comfort that participants' experience of virtual can be as good, if not better, than face to face. There was a 2% increase in participants rating courses as "Excellent" to 54% during the period (H1 FY 20: 52%). We have taken steps to protect our gross profit margin should clients choose to switch a proportion of deliveries back to face to face by increasing face to face prices.

We continue to invest in new digital products. "Performa" is a 1:1 coaching platform that delivers high impact, precision coaching at scale using a proprietary methodology and will launch in the New Year. It builds on the expertise the Group has developed over 20 years in delivering live sessions to multi-participant audiences and harnesses the latest technology. Our second new digital product DXP (Digital Content Experience) will launch in FY23, as we focussed resource on Performa whilst actively seeking to recruit further digital expertise.

Innovation has accelerated following increased investment. Our new DEI point of view "The Inclusion Solution" and associated products has supported revenues from DEI of 35% of total revenues in the period (H1 FY20: 13%), increasing 175% on H1 FY20 revenues. During H1 FY22 we held webinars on hybrid working and are developing new products that will be available in H2 FY22. Our new point of view on leadership development was very well received at our recent in person CHRO event in London to over 60 senior HR professionals. Our new point of view on wellness at work will launch in H2 FY22. Our Academic Board comprises of an eminent range of behavioural science specialists who help select and validate our points of view. The Board has been further strengthened by the appointment of Tessa West Ph.D, Associate Professor of Psychology at New York University and Dr Jay Van Bavel, Associate Professor of Psychology and Neural Science with an affiliation at the Stern School of Business in Management at New York University.

The gross profit generated from the revenues was reinvested back into the business as intended to support future growth. Overheads of £20.6m in the six months to 30 September 2021 increased 38% (H1 FY20: £15.0m). The majority of the additional operational investment is in people costs as we expand and upgrade our commercial team, innovation, marketing and operations teams. Our marketing investment also saw the completion of our rebranding during the period including the website relaunch.

Financial Performance

Revenue for the six months to 30 September 2021 increased 1% (7% on a constant currency basis) on pre-COVID levels to £24.1m (H1 FY20: £23.9m). Actual reported revenues were adversely impacted by the strengthening of sterling against the US dollar to a period average of 1.38 (H1 FY20: 1.25). Revenue from the top 25 clients increased to 47% of regional revenue (H1 FY20: 46%).

In EMEA, revenue increased by 1% to £10.3m (H1 FY20: £10.2m), representing 43% of total revenue. Revenue from the top 25 clients decreased to 66% of regional revenue (H1 FY20: 70%).

In the US, revenue increased by 1% (12% on a constant currency basis) to £13.9m (H1 FY20: £13.7m), representing 57% of total revenue. Revenue from the top 25 clients increased to 56% of regional revenue (H1 FY20: 55%).

Revenue from digital products in H1 FY22 increased by 44% (at constant currency) to £2.7mn (H1 FY20: £1.9m), representing 11% of total revenue (H1 FY20: 8%). Digitally-enabled revenue (including workouts delivered virtually) increased by 175% to £19.5m (H1 FY20: £7.1m), representing 81% of total revenue (H1 FY20: 30%), following the significant shift to virtual deliveries driven by our response to COVID.

Gross profit increased by 7.1 percentage points to 85.9% (H1 FY20: 78.8%) in the period and reflects the higher mix of digital and digitally-enabled revenues in the period. Prices for face to face deliveries have been increased to help mitigate any impact on gross profit margin should clients decide to return to this offer.

Adjusted overheads of £20.6m in the period increased by 38% (H1 FY20: £15.0m) as we continue to invest in our commercial team, innovation, marketing and operations. This will support future growth of our existing revenue streams and prepare for the launch of our new digital products. Excluding digital heads that are capitalised, salary costs increased 34% with average headcount increasing 19% to 281 (H1 FY20: 234) and average salaries increased 13% on H1 FY20. Share based payments were £0.3m in the period (H1 FY20: £0.1m). Awards to management were granted at 31 March 2021 with performance conditions agreed in July 2021.

Adjusted profit before tax in the period was £17k (H1 FY20: £3.9m) as gross profit was reinvested to support future growth.

Basic earnings per share in the period was -0.01 pence (H1 FY20: earnings of 3.07 pence). Adjusted diluted loss per share was -0.01 pence (H1 FY20: 3.06 pence).

The Group continued to invest in its new digital products with £2.4m (H1 FY21: £1.2m) capitalised during the period, which meets the definition of development costs under IAS 38, "Intangible assets". Total intangible assets were valued at £5.2m at 31 September 2021. A further £0.4m was capitalised in tangible assets in the period relating to IT equipment and office fixtures and fittings.

The balance sheet remains strong with no bank debt and cash at bank at 30 September was £12.0m, a reduction of £4.8m from the year-end balance at 31 March 2021 of £16.8m. This was due predominantly to £2.8m capital expenditure and a £2.5m decrease in payables and provisions. The strong recovery in performance in H2 FY21 led to higher payments of commissions and reductions in deferred income during H1 FY22. The Group continues to manage working capital tightly: overdue debt has fallen to 10% of trade debtors at 30 September 2021 compared to 14% at the same time a year ago and 24% two years ago.

The Group secured a £10m debt facility (£6m RCF, £4m accordion) on 30 September 2021 which matures after 3 years, providing additional flexibility if required.  The facility remains undrawn as at 3 December 2021.

Overall net assets increased by £0.4m to £17.9m in the six months to 30 September 2021.

Dividend

In line with our strategy to focus on investing in digital for future growth, no interim dividend will be paid. 

Board

As announced on 11 June 2021, the Board welcomed the appointment of Ruby McGregor-Smith CBE as Board Chair effective 15 July 2021, with Joanne Cash stepping down and remaining as a non-executive on the Board.

As announced on 11 June 2021, Trevor Phillips has replaced Ruby McGregor-Smith CBE as Chair of the Remuneration Committee, effective 15 July 2021.

As announced today, Dominic Neary will be appointed to the Board with effect from today and he will assume the role of Chief Financial Officer of the Company from 1 January 2022. Dominic brings a wealth of relevant experience gained from senior finance roles at high growth digital and international companies. Dominic will be replacing Richard Steele who has been the Chief Financial Officer of Mind Gym since before its IPO in 2018. Richard will stand down from the Board, and as Chief Financial Officer, on 31 December 2021 after a handover period to ensure the smooth transition of the role. The Board wishes to express its gratitude and appreciation to Richard for the significant role he has played in the Company's growth and development and wishes him all the best for the future. We look forward to working with Dominic to deliver our digital transformation and establish Mind Gym as the go-to partner for delivering cultural change.

Outlook

The second half of the year has continued to see growth on FY20. We expect revenues to continue to increase on pre-COVID levels as we maintain our investment strategy to deliver long-term, sustainable growth with our first new digital product, Performa launching in Q4 FY22 and our new digital platform, DXP, which is in the middle of Beta trials, to be launched in FY23.  We face uncertainty as we enter Q4 with an increase in reported rates of COVID infections and the possible impact of the Omicron variant which may affect client decision making. Nonetheless, Mind Gym has demonstrated significant adaptability and resilience to date and remains focused on the delivery of its leading client solutions.  Our expectations for the full year therefore remain broadly unchanged.

Ruby McGregor-Smith

Chair

Octavius Black 

Chief Executive Officer

Richard Steele

Chief Financial Officer