t
Mind Gym PLC announced its audited final results for the year ended 31 March 2024, reporting revenue of £44.9m (down 18%), an adjusted EBITDA loss of £0.3m, and a statutory loss before tax of £12.1m. The company concluded the period with £1.4m cash at bank and recorded £8.9m in exceptional costs, including a £6.6m digital asset impairment. Christoffer Ellehuus was appointed CEO, joining in January 2024 and formally becoming CEO in April 2024, while Octavius Black transitioned to Executive Chair.
| Date | 17 Jun 2024 |
| Time | 07:00:08 |
| Category | Results |
| ID | 5873S |
Mind Gym PLC
("MindGym", the "Group" or the "Company")
Final results for the year ended 31 March 2024
Improvement in performance in second half with a new strategy for medium term growth and profitability
MindGym (AIM: MIND), the global provider of human capital and business improvement solutions, announces its audited results for the year ended 31 March 2024.
Results summary
|
|
12 months to 31 Mar 2024 (FY24) |
12 months to 31 Mar 2023 (FY23) |
Change |
|
Revenue |
£44.9m |
£55.0m |
-18% |
|
Gross profit margin |
86.2% |
88.4% |
-220 bps |
|
Adjusted EBITDA profit/ (loss) |
£(0.3m)1 |
£5.3m |
-106.5% |
|
Statutory profit/(loss) before tax |
£(12.1m) |
£3.0m |
-507.2% |
|
Diluted EPS (adjusted) |
(4.25p)1 |
2.84p |
-7.09p |
|
Diluted EPS (unadjusted) |
(10.86p) |
2.84p |
-13.7p |
|
Cash (used in)/ generated from operations |
£(3.1m) |
£4.4m |
-£7.5m |
|
Cash at bank |
£1.4m |
£7.6m |
- £6.2m |
|
Capital expenditure |
£4.2m |
£5.1m |
-18% |
1 Adjusted results exclude the impact of £8.9m of exceptional costs incurred in the period
Financial and Operating highlights
· Market dynamics resulted in a challenging FY24, particularly in Q2; revenues of £44.9m were down 18% on FY23 (£55.0m):
o Macroeconomic headwinds affected confidence in key sectors, including tech (especially in US) and consumer/manufacturing companies who are dependent on global supply chains
o Increased caution on HR budgets has affected the buying cycle, with more client stakeholders needed to sign off budgets:
§ growing requirements for pilots to establish proof of concept first
§ fewer big-ticket requests for proposal
o There has been increased competition for client budgets resulting from unprecedented investment in HR platforms and technology in recent years
o The market has seen a material decline in client spend on DEI, a significant revenue stream for MindGym, particularly in the US; this contributed to the 32% US revenue decline vs prior year
o EMEA performance was broadly flat on prior year
· Significant cost reduction plan implemented providing greater operating resilience; profitability was restored in H2:
o Annualised reduction of more than £11m across operating and capital expenditure implemented in FY24, notwithstanding some reinvestment in leadership and marketing capability. This contributed to:
§ Adjusted operating expenditure (excluding exceptional items, depreciation and amortisation) of £39.1m, down 10% on FY23 (£43.4m)
§ Capital expenditure of £4.2m, down 17.5% on FY23 (£5.1m)
§ Capital expenditure in H2 reduced to £1.2m from £3.0m in H1 (59% half-on-half reduction)
o Return to adjusted EBITDA profitability in H2:
§ Full year adjusted EBITDA loss of £0.3m (FY23: profit of £5.3m), was comprised of an H1 loss of £4.1m, largely offset by a profit in H2 of £3.8m
o Exceptional costs of £8.9m, comprised the following items:
§ Digital asset impairment - £6.6m
§ Non-cash impairment of lease on US Office - £0.5m
§ Restructuring costs - £1.8m
o Loss before tax of £12.1m (FY23: profit of £3.0m), driven by reduced revenue and the impact of the exceptional costs
· MindGym retains sufficient cash and liquidity:
o At 31 March 2024, the Group had cash of £1.4m (FY24: £7.6m), which was stable vs December 2023 (£1.2m)
o Entered FY25 with a significantly reduced run-rate of operating and capital expenditure
o The Group retains access to a £2m undrawn loan facility
Board evolution
· Appointment of Christoffer Ellehuus as CEO as part of planned succession (joined in January 2024)
· Octavius Black transitioned to Executive Chair with responsibilities focusing on increasing MindGym's market presence, further development of thought leadership and building relations with major clients
New strategy for growth and profitability making MindGym solutions easy to buy, easy to deliver, and easy to renew
· New strategy for growth and profitability outlined in CEO report with a focus on evolving MindGym from being a provider of individual behavioural change programmes to becoming a strategic behavioural change partner for CHROs. The strategy is built on 2 components:
o Short-term: Focus on commercial execution; laying the foundations for sustained growth
o Medium-term: Packaging IP, products, and data to scale the business for accelerated growth
Current Trading and Outlook
· FY25 will be a year of recalibration as we implement the new strategy which will return MindGym to its historic performance levels
· Whilst it will take time before the full benefit of this new strategy is realised, the Board expects EBITDA profitability and cash generation in FY25
· The opportunity for MindGym in a highly fragmented $80bn Human Capital Advisory market is as compelling as ever
· In the medium-term, the Board is therefore confident that the business will deliver revenue growth in excess of 10% CAGR, with EBITDA margins between 15% and 20%
Christoffer Ellehuus, Chief Executive Officer of MindGym, said:
"I believe that we have all the right foundations for future growth: strong client relationships, innovative solutions, and a very talented team. I am excited about leading MindGym forward on a path of profitable, sustainable growth, profitability making MindGym solutions easy to buy, easy to deliver, and easy to renew."
The Company will host a webcast and conference call for analysts and investors at 9:00am BST today. If you would like to attend the webcast and conference call, please contact [email protected].
Enquiries
|
Mind Gym plc Christoffer Ellehuus (CEO) Dominic Neary (CFO) |
+44 (0) 20 7376 0626 |
|
|
|
|
Liberum (Nominated Adviser and Broker) Nick How Edward Mansfield |
+44 (0) 20 3100 2000 |
|
|
|
|
MHP (for media enquiries) Reg Hoare Katie Hunt Veronica Farah |
+44 (0) 20 3128 8100 |
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated by the Market Abuse Regulation EU no.596/2014, as it forms part of the UK law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
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 listed 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
Statement of the Executive Chair
Over the past 23 years, MindGym has built a reputation as a global leader, advising many of the world's most ambitious companies on how to harness the soft power of their talent to deliver hard business results.
Our research has led the market, our portfolio of live products has been adopted in c.50 countries with 4 million people, and our loyal clients stay with us for many years, consistently accounting for between 80% and 90% of annual revenue. We have won countless awards for our client partnerships to deliver lasting impact.
What happened in FY24
Even so, we were unable to escape the headwinds that have been felt widely across HR services. Business leaders are giving greater scrutiny to HR investments which has extended buying cycles and, in some cases, recalibrated overall spend. For example, during the year we won a number of large projects only for our HR client to then discover that their budget had been altered and so the scope needed to be reduced or the programme postponed.
In addition, unprecedented investment in HR platforms and technology in recent years has created a more crowded market for HR services. While clients are increasingly disenchanted with the low employee take-up and negligible impact of many of these new platforms, this temporary growth in new offers increased competition for HR budgets.
These trends, combined with a change in priorities, including a significant reduction in DEI investment, (which particularly impacted our US business), resulted in a year-on-year revenue reduction of 18%.
We acted swiftly to reset the cost base of the business in response to the sudden reduction in revenue. In this context, I am pleased with the improved financial performance during the second half of FY24, largely mitigating the losses from the first half and delivering an H2 EBITDA margin closer to the historic norm.
While the market turbulence and corresponding client caution may continue into FY25, we are seeing a return to client demand both for leadership programmes and integrated solutions with a significant live, both in person and virtual, element. This plays to MindGym's signature strengths.
Our investment in technology
We made a commitment to invest in new technology, some of which has created new avenues for growth.
Our new one-to-one coaching platform, Performa, was chosen by Burberry to replace their existing coaching platform and went on to win the Brandon Hall Excellence Award for 'Best Advance in Coaching and Mentoring'.
Our new diagnostic platform provides the basis for our emerging diagnostics business with a number of new clients in the year and significant opportunity for growth.
In response to the downturn in revenue, however, several of our other digital product investments were stopped. This resulted in an impairment of £6.6m in the period.
Digital revenues, including SaaS style services, currently account for 10% of revenue. We continue to explore ways to embed elements of our existing technologies, as well as AI, into our existing solutions and create a model that is set up for easier renewal.
A new era for MindGym
The most significant news this year is the appointment of a new CEO. In January 2023, I asked the Board to look for my successor and I'm delighted that we found an excellent candidate in Christoffer Ellehuus, who joined the company in January 2024 as CEO Designate and formally became CEO and a member of the Board in April 2024.
Christoffer comes to MindGym with a track record of successful commercial, product and digital leadership in our market, both in leading divisions of major advisory businesses as well as CEO of a smaller global learning business. Christoffer has worked and lived in both the US and EMEA and so understands our core markets well.
The immediate priority is commercial execution. This requires taking MindGym's remarkable proprietary IP and unique blend of live, virtual and digital experiences and data, and making MindGym's proposition easier to buy, easier to sell and, in due course, easier to renew. The simplification that Christoffer is leading will help shorten the buying cycle and demonstrate the commercial value of HR investments to business leaders.
At the same time, we will build what we have currently termed the 'Rosetta Stone for behavioural change'. This will use primary data from MindGym, combined with our clients' metrics, to advise business leaders on how to invest in their talent to deliver the greatest impact on business performance. This will give clients the opportunity to take a much more integrated and data-driven approach to maximising human performance, with MindGym at the core.
The Board
Following Christoffer's transition to the CEO role, I am excited to take on the mantle of Executive Chair. In this role I will remain fully engaged with the business with particular focus, beyond chairing the Board, on promoting MindGym in the market and building our relationships with the leaders of many of the world's most ambitious companies, I will also remain involved with identifying emerging market trends and the development of MindGym's new pioneering human capital solutions.
As a result of these changes, Ruby McGregor Smith stepped down from the Board and her role as Chair in April, slightly ahead of the planned end to her tenure at the AGM in July. I'm immensely grateful to Ruby for her sterling service as Chair of MindGym, helping steer us through the external turbulence of COVID, the uncertainty due to the conflict in Ukraine and the cost-of-living crisis. She has been a very supportive partner throughout these challenging times.
The search for a new Independent Non-Executive Director has now commenced and an update will be provided in due course.
As previously communicated, Joanne Cash has continued in her role as Non-Executive Director but is not seeking reappointment at the AGM in July 2024. I'm profoundly grateful for Joanne's guidance over the last 15 years and, in particular, her role as Chair in taking MindGym through its successful IPO. MindGym would not have become what it is without her.
ParentGym
MindGym has a strong track record with all our stakeholders. In 2009, we launched ParentGym, a programme providing free training to parents of children aged 2-11, and in FY24 we ran sessions for c.1,200 families with the aim of helping them to grow the next generation. This was an increase of over 30% on the number of families we supported in FY23. We also continued our partnership with the Prison Advice and Care Trust (PACT), running a bespoke programme to support parents in prison and their families. In FY25 we aim to further increase the number of families with support through our six-week programme, in addition to exploring our digital strategy to reach a wider audience of parents.
Dividend
No dividend has been paid or proposed for the year ended 31 March 2024. The Board will continue to keep the appropriateness of dividend payments under periodic review and will provide an update at the time of the H1 FY25 interim results announcement.
Outlook
The changes we have made to realign the cost base mean that we will be profitable and cash generative in FY25 which will be a year of recalibration as Christoffer implements his strategy to make it easy to buy, easy to sell and easy to renew MindGym Solutions.
This will bear fruit in FY26 and beyond, taking us, in the medium term, back to our historic double-digit revenue growth and margins.
The opportunity for MindGym in the highly fragmented Human Capital market is as compelling as ever. With our new CEO and his focus on both commercial execution and building the 'Rosetta Stone' for behavioural change, the business is positioned well to capitalise on its future opportunities.
Octavius Black
Board Chair
14 June 2024
CEO's review
FY24 Review
FY24 was a challenging year for MindGym in common with the vast majority of HR services providers.
In this market, EMEA revenues remained flat while US saw significant decline.
The US market has been challenging for MindGym since COVID. MindGym has a strong offer in DEI which has been a significant part of US revenue (but less so in EMEA). There was a slight decline in demand for DEI during FY23 which was followed by a much more significant drop in FY24.
MindGym's brand awareness is also lower in US, which is a larger and more crowded market. Investments in digital marketing capability and building the right mix of skills in our US team will position the business for sustainable future growth, but it will take time for the impact of these to be seen in higher revenue.
In response to the decline in revenue, management acted quickly to reset the cost base of the business and improve cash and liquidity. This resulted in an annualised reduction of more than £11m in operating and capital expenditure, which was partially made possible by the investments in global operations that the business has made over the past 18 months.
The impact of these changes, coupled with half-on-half revenue growth, was seen in improved second half performance in FY24. The full year adjusted EBITDA loss of £0.3m (FY23: profit of £5.3m) was comprised of a loss of £4.1m during H1 and a profit of £3.8m in H2.
Market opportunity:
The $320bn Learning and Development market is vast and highly fragmented. Within this MindGym's core markets of Leadership and Interpersonal Skills will represent c. $80bn in 2025.
The increasing speed of technological developments such as AI, coupled with geo-political and economic uncertainty, mean that the workplace is changing at a faster rate than ever before. As a result, CEOs recognise the need for investment in their leaders, people and culture, to create adaptable and resilient organisations that can perform during uncertainty.
Despite the size of the opportunity, the Learning and Development market remains highly fragmented, with a high number of suppliers who often provide overlapping solutions, many of which do not yet deliver promised utilisation and return on investment for clients.
MindGym's strength in IP, coupled with our ability to deliver highly engaging learning experiences using both live and digital components complemented by data and diagnostics, positions the business well for success.
Building on strong foundations:
Since joining the company in January 2024, I have had the opportunity to spend time with clients and our teams in both Europe and the US. My overall impression, based on my 25 years of experience in this market, is that we have a strong and loyal client base, competitive IP and products, and an amazingly competent and passionate team. In short, we have a strong foundation from which to grow and scale the business, but we need to focus on commercialisation.
Here are my top observations as it relates to the strengths and opportunities for the business:
Clients: I have been hugely impressed by the loyalty and advocacy of MindGym's client base. Our client feedback scores remain exceptionally high; 85% of new sales come from existing or past clients due to the previous positive experience they had with MindGym solutions and the quality of our content, and we are deeply committed to customer-centric innovations that we can package and scale to the broader MindGym client base.
Our people: I am immensely grateful to all the highly competent and passionate colleagues at MindGym. There is no doubt that FY24 was a challenging year for the organisation with significant headcount reductions and changes. However, I find at the core of MindGym culture a strong passion for our mission and an equally strong spirit of ingenuity and generosity for our clients and each other.
Intellectual Property: MindGym has market leading IP on culture, leadership, and performance based on our 23 years of psychology-based research and data analysis. This is supported by a proven library of more than 700 assets, tried and tested with more than 4 million business leaders in c.50 countries. To enable the next phase of growth, we have an opportunity to integrate all this research and data into a simpler and more holistic model for behaviour change that allows us to tie our solutions more directly to client business outcomes and expand client conversations.
Digital Marketing - go-to-market strategy: MindGym's world-class research insights form a strong differentiated basis for our market awareness-building activities through client roundtable discussions, webinars, and events. However, we lack the digital marketing infrastructure to tap into a significant pool of previous clients who no longer do business with us and to expand engagements with existing clients who often only do one smaller defined project with us currently.
Commercial effectiveness: MindGym has built an impressive library of more than 700 tried-and-tested product assets that our team use to create engaging solutions for clients. However, there is an opportunity to combine these product assets into market-facing packages that address common client challenges, which in turn makes it easier to sell and buy MindGym solutions.
Capability to deliver at scale: MindGym has the ability to deliver both virtually and in person for clients all around the world. We have a wide network of certified facilitators and coaches who can deliver our solutions at scale. However, as many of our clients today also consume Learning and Development products through human capital and learning platforms, there's an opportunity for us to further expand our reach by integrating into partner ecosystems.
Strategy for growth
Based on my observations of the business and the existing strong foundations, I believe there is a strategic opportunity to take MindGym from the trusted, but episodical, training provider it is today to becoming a true strategic behavioural change partner for the world's leading organisations. This vision will form the foundation for my strategy for growth, which will have two distinct phases (as outlined in greater detail in the business model and strategy section of the Annual Report and Accounts):
· In the short term, we will focus on strengthening how we operate - making MindGym's products easier to buy, easier to deliver, and easier to renew. This focuses on rebuilding our sales force, improving commercial effectiveness, and enhancing our digital marketing capability to drive lead generation with more packaged go-to market messages and solution sets.
· Over the medium term, we will be investing in further productising and digitising our IP and products as well as enhancing our diagnostic offering to be able to measure the business- performance impact of our solutions. This will allow us to expand our strategic and commercial relationship with clients across multiple behavioural change projects all anchored in a Unified Behavioural Change Model, underpinned by data.
As we enter FY25, the speed at which we can deliver on this strategic ambition will of course depend on our ability to generate profit that allows for investments needed in the product and marketing capabilities referenced above.
Outlook:
FY25 will be a year of calibration as it will take time before the benefits of the new strategy are realised.
The actions taken during FY24 to reduce the cost base of the business mean that MindGym enters FY25 in a more resilient financial and operating position; the Board expects EBITDA profitability in the year and cash generation in FY25.
In the medium term, the opportunity for MindGym in this highly fragmented market is significant. The strategy I have outlined will set the business up to return to revenue growth of >10% p.a. and 15% to 20% operating EBITDA margins over the medium term.
I believe that we have all the right foundations for future growth potential: strong client relationships, innovative solutions, and a very talented team. I am excited about leading MindGym forward on a path of profitable, sustainable growth.
Christoffer Ellehuus
Chief Executive Officer
14 June 2024
Financial review
Revenue for the year of £44.9m represented a year-on-year reduction of 18% (FY23: £55.0m), reflecting macro headwinds, greater scrutiny of HR investments by business leaders and increased competition for client budgets from the unprecedented investment in HR technology and platforms in recent years. US performance was particularly adversely impacted by a material decline in client spend on DEI.
Revenue in H2 of £24.0m (FY23 H2: £28.3m) represented a 15% half-on-half increase from £20.9m in H1 (FY23 H1: £26.8m).
In response to H1 performance, management reacted to realign the cost base of the business to ensure that MindGym remains profitable and cash generative. This involved reducing annualised expenditure by over £11.0m, comprising a reduction of more than £7m in operating expenditure and a £4m reduction in capital expenditure.
Circa 50% of the reductions related to lower volumes, with the remaining cuts being in Technology and Innovation. This meant that several of our digital product investments were stopped. We continue to explore how to embed this technology into our existing solutions as opposed to focusing on them as standalone platforms.
These changes resulted in one-off exceptional charges in the period of £8.9m comprising of:
- £6.6m digital asset impairment
- £1.8m staff restructuring
- £0.5m impairment of US office operating lease
As a result of both the increase in revenue and the significant cost reduction programme undertaken during the period, there was a significant half-on-half improvement in profitability across the period. In H1 there was an adjusted EBITDA[1] loss of £4.1m (FY23 H1: £1.9m profit).
In H2 there was an adjusted EBITDA profit of £3.8m (FY23 H2: £3.4m) - albeit H2 benefited relatively by circa £1.2m due to lower bonus accrual costs and bonus accrual releases. This resulted in an overall adjusted EBITDA loss for the year of £0.3m (FY23: £5.3m profit).
There was a loss before tax for the year of £12.1m, impacted by the exceptional charges for the period. This compared to a profit in FY23 of £3.0m.
This loss, partially offset by the resulting tax credit, resulted in an adjusted diluted EPS of (4.25p) (FY23: 2.84p) and an unadjusted diluted EPS of (10.86p) (FY23: 2.84p).
The group anticipates cash generation by the end of FY25 and MindGym retains sufficient and improving liquidity:
· Cash at 31st March 2024 was £1.4m (vs. £1.2m at 31st December 2023)
· Liquidity is improving in line with MindGym's 12-month EBITDA; headroom with the RCF facility will double in H1 FY25 from £2m today
· MindGym's current facility ends in September 2024, at which point the business intends to switch to a more cost-effective overdraft facility of circa £4m
· MindGym's $1m annual US lease ends in February 2025
The economic headwinds that impacted performance in the period were most pronounced in the US, particularly in the technology sector. As a result, revenue for the US region fell 32% YoY to £21.2m (FY23: £31.3m).
Revenue in EMEA was more resilient, boosted by the major energy framework, which is receiving strong positive client feedback, and which continues into FY25.
|
|
Year to March 31st 2024 |
Year to March 31st 2023 |
Change |
|
|
|||
|
Group Statutory View |
44,914 |
55,011 |
-18% |
|
EMEA |
23,729 |
23,742 |
0% |
|
US |
21,185 |
31,269 |
-32% |
Delivery revenues grew proportionally by 710 bps in the period to comprise 67% of total revenue for FY24. This movement, which was anticipated in the prior year annual report, was mostly impacted by commencement of the Delivery phase of the major energy framework contract.
It also reflected a reduction in the proportion of Design and Advisory (D&A) revenue in the period. D&A revenue typically occurs at the commencement of larger programmes. This component of revenue was impacted by the delays we have seen to the commencement of new programmes.
Revenue mix by type compared to previous year
|
|
FY24 |
FY23 |
% change |
|
Delivery |
67.4% |
60.3% |
7.1% |
|
Design |
13.0% |
17.2% |
-4.2% |
|
Advisory |
1.5% |
1.4% |
0.1% |
|
Digital |
10.2% |
13.1% |
-2.9% |
|
Licensing and certification |
5.0% |
5.6% |
-0.6% |
|
Other services |
2.9% |
2.4% |
0.5% |
|
Total |
100% |
100% |
|
|
Year ended 31 March 2024 |
|||
|
Revenue type |
EMEA |
US |
Global |
|
Delivery |
67.1% |
67.8% |
67.4% |
|
Design |
15.0% |
10.9% |
13.0% |
|
Advisory |
2.1% |
0.7% |
1.5% |
|
Digital |
9.6% |
10.7% |
10.2% |
|
Licensing and certification |
2.2% |
8.2% |
5.0% |
|
Other services |
4.0% |
1.7% |
2.9% |
|
Total |
100% |
100% |
100% |
|
Year ended 31 March 2023 |
|||
|
Revenue type |
EMEA |
US |
Global |
|
Delivery |
60.2% |
60.6% |
60.3% |
|
Design |
19.0% |
15.7% |
17.2% |
|
Advisory |
1.7% |
1.1% |
1.4% |
|
Digital |
13.4% |
12.8% |
13.1% |
|
Licensing and certification |
3.3% |
7.5% |
5.6% |
|
Other services |
2.4% |
2.3% |
2.4% |
|
Total |
100% |
100% |
100% |
Gross margin of 86.2% represented a reduction of 2.2% (FY23: 88.4%). This primarily reflected the shift in product mix, with a reduced proportion of Design and Advisory work, the costs for which are included within administrative costs.
The reduction was more marked in EMEA, where the gross margin declined 3.1% to 85.4% (FY23: 88.5%), impacted by the increased proportion of in-person delivery revenues under the major energy framework.
In US, the gross margin of 87.1% represented a reduction of 1.3% on FY23 (88.4%).
Adjusted administrative expenses, excluding depreciation, amortisation and exceptional charges were £39.1m in the period. This represented a year-on-year reduction of 10% (FY23: £43.4m), primarily reflecting the in-year impact of the major cost reduction exercise.
This resulted in an Adjusted EBITDA loss for the period of £0.3m (FY23: £5.3m profit), at margin of -0.8% (FY23: 9.6%).
The loss before tax for the year was £12.1m (FY23: profit of £3.0m). This figure was impacted by £8.9m of one-off exceptional costs, which included £1.8m of restructuring costs required to deliver the £11.0m of ongoing expenditure reduction.
During the period a major review of digital product expenditure was undertaken, which resulted in a decision to focus investment on digital assets that were already revenue-generating, principally Performa and Diagnostics, and to pause spend on other products.
A proportion of the features and underlying technology built in the development of these assets on which development was paused will be utilised in the integrated products and solutions MindGym continues to deliver to clients. However, since it is now not clear that this technology will form part of discrete and separately identifiable products in line with IAS38, the directors have taken the decision to fully impair the carrying value of the impacted products. This resulted in a one-off impairment charge of £6.6m in the period.
This sharpened product focus contributed to a 17.5% year-on-year reduction in capital expenditure to £4.2m (FY23: £5.1m). Within the year, the reduction was even more marked, with capital expenditure of £3.0m in H1 reducing to £1.2m in H2.
During FY24 MindGym surrendered losses in relation to R&D tax credits of £8.7m in respect of FY22 and £4.3m in respect of FY23, in return for cash of £1.9m.
This resulted in a reduction in the deferred tax asset of £3.3m, which partially offset the impact of the tax credit resulting from the loss in the period and the value of further R&D tax credits relating to FY24.
|
|
FY24 Reported |
FY23 Reported |
|
|
£'000 |
£'000 |
|
Profit/(loss) before tax |
(12,147) |
2,964 |
|
Tax credit/(charge) |
1,259 |
(29) |
|
PAT (earnings) |
(10,888) |
2,935 |
|
ETR % |
10.36% |
0.98% |
This resulted in a full year tax credit for FY24 of £1.3m (FY23: charge of £0.0m).
At the end of FY24 we recorded a deferred tax asset of £3.6m in respect of tax losses, predominantly arising as a result of the impact of the UK R&D regime (FY23: £5.3m). This is partially offset by a £1.5m deferred tax liability (FY23: £2.4m) being the timing difference linked to capitalised development costs
There was an adjusted diluted loss per share in the period of 4.25p (FY23: 2.84p profit). The unadjusted diluted loss per share was 10.86p (FY23: 2.84p profit).
On an undiluted basis the adjusted loss per share was 4.25p (FY23: 2.93p profit) and the unadjusted loss per share was 10.86p (FY23: 2.93p profit).
No dividend has been paid or proposed for the year ended 31 March 2024. The Board will continue to keep the appropriateness of dividend payments under periodic review and will next provide an update at the time of the H1 FY25 interim announcement.
Cash and cash equivalents decreased from £7.6m in FY23 to £1.4m in FY24. This included the impact of £4.2m of capital expenditure in the period, reduced from £5.1m in FY23. The run rate on capital expenditure decreased even more significantly through the year, with £3.0m in H1, reducing to £1.2m in H2.
Following the improved half-on-half profitability, the cash position improved slightly during Q4 of FY24, and management expect cash generation in FY25.
Net trade receivables reduced by £0.7m from FY23, with the proportion of overdue receivables at 31 March 2024 reducing to 6%, down from 7% in FY23 and 9% in FY22.
|
Cash conversion |
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Cash generated from operations |
-3,094 |
4,393 |
|
EBITDA |
-9,226 |
5,294 |
|
Add back non-cash exceptionals* |
7,121 |
0 |
|
EBITDA excl non-cash exceptionals |
-2,105 |
5,294 |
|
Cash conversion (Cash from operations /EBITDA) |
147% |
83% |
|
|
|
|
*Adjusting for impact of non-cash exceptional charge in the period in respect of intangible asset and US office lease impairments.
|
Cash conversion |
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Overdue debtors % |
6% |
7% |
The Board has reviewed scenario analyses to help assess their forward-looking assessment of the viability of the Group. The Directors are confident that the Group has adequate resources to continue in operational existence for the foreseeable future. The Board has reviewed scenarios including a range of revenues and cost-reduction actions that could be taken to mitigate a downturn. This is supported by strong cash management and financial controls, reduced expenditure heading into FY25 and sufficient and improving liquidity.
The Group has a diverse portfolio in excess of 500 clients across many industrial sectors and countries. The largest client (our Energy Framework) accounted for 13% of Group revenue in the year; the next client accounts for less than 5% of group revenue.
The Group has translational foreign currency exposure arising on the consolidation of overseas company results into Sterling. Where possible the exposure is naturally hedged; for example, by matching US Dollar revenues with US Dollar costs in the US subsidiary. The Group does not currently use forward exchange contracts or currency options to hedge currency risk.
Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be constructed as a profit forecast.
Dominic Neary
Chief Financial Officer
14 June 2024
MINDGYM PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year to 31 March 2024 |
Year to 31 March 2023 |
|
|
Note |
£'000 |
£'000 |
|
Continuing operations |
|
|
|
|
Revenue |
3 |
44,914 |
55,011 |
|
Cost of sales |
|
(6,194) |
(6,360) |
|
Gross profit |
|
38,720 |
48,651 |
|
Administrative expenses |
|
(50,734) |
(45,568) |
|
Operating (loss)/ profit |
3,4 |
(12,014) |
3,083 |
|
Finance income |
8 |
30 |
55 |
|
Finance costs |
8 |
(163) |
(174) |
|
(Loss)/profit before tax |
|
(12,147) |
2,964 |
|
|
|
|
|
|
Adjusted loss before tax |
|
(3,264) |
- |
|
Adjusting items |
5 |
(8,883) |
- |
|
Total adjustments |
|
(8,883) |
- |
|
|
|
|
|
|
(Loss)/profit before tax |
|
(12,147) |
2,964 |
|
Tax on (loss)/profit |
9 |
1,259 |
(29) |
|
(Loss)/profit for the financial period from continuing operations attributable to owners of the parent |
|
(10,888) |
2,935 |
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
Exchange translation differences on consolidation |
|
(98) |
297 |
|
Other comprehensive (loss)/income for the period attributable to the owners of the parent |
|
(98) |
297 |
|
Total comprehensive (loss)/income for the period attributable to the owners of the parent |
|
(10,986) |
3,232 |
|
|
|
|
|
|
(Loss)/earnings per share (pence) |
|
|
|
|
Basic |
10 |
(10.86) |
2.93 |
|
Diluted |
|
(10.86) |
2.84 |
|
Adjusted (loss)/earnings per share (pence) |
|
|
|
|
Basic |
10 |
(4.25) |
2.93 |
|
Diluted |
|
(4.25) |
2.84 |
MINDGYM PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|
|
31 March 2024 |
31 March 2023 |
|
|
Note |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Intangible assets |
12 |
8,252 |
12,320 |
|
Property, plant and equipment |
13 |
2,100 |
3,691 |
|
Deferred tax assets |
9 |
2,281 |
3,229 |
|
Other receivables |
15 |
- |
230 |
|
|
|
12,633 |
19,470 |
|
Current assets |
|
|
|
|
Inventories |
14 |
40 |
53 |
|
Trade and other receivables |
15 |
7,787 |
9,527 |
|
Current tax receivable |
|
551 |
779 |
|
Cash and cash equivalents |
|
1,369 |
7,587 |
|
|
|
9,747 |
17,946 |
|
Total assets |
|
22,380 |
37,416 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
16 |
8,474 |
11,423 |
|
Lease liability |
17 |
980 |
1,121 |
|
Redeemable preference shares |
18 |
50 |
50 |
|
Current tax payable |
|
1 |
20 |
|
|
|
9,505 |
12,614 |
|
Non-current liabilities |
|
|
|
|
Lease liability |
17 |
1,038 |
1,988 |
|
|
|
|
|
|
Total liabilities |
|
10,543 |
14,602 |
|
Net assets |
|
11,837 |
22,814 |
|
Equity |
|
|
|
|
Share capital |
21 |
1 |
1 |
|
Share premium |
|
258 |
242 |
|
Share option reserve |
|
481 |
496 |
|
Retained earnings |
|
11,097 |
22,075 |
|
Equity attributable to owners of the parent company |
|
11,837 |
22,814 |
The financial statements were approved and authorised for issue by the Board of Directors on 14 June 2024 and were signed on its behalf by:
Dominic Neary
Chief Financial Officer
MINDGYM PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
|
Share capital |
Share premium |
Share option reserve |
Retained earnings |
Total equity |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 April 2022 |
|
1 |
213 |
608 |
18,804 |
19,626 |
|
|
|
|
|
|
|
|
|
Profit for the period |
|
- |
- |
- |
2,935 |
2,935 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Exchange translation differences on consolidation |
|
- |
- |
- |
297 |
297 |
|
Total comprehensive income for the period |
|
- |
- |
- |
3,232 |
3,232 |
|
Exercise of options |
|
- |
29 |
(39) |
39 |
29 |
|
Credit to equity for share-based payments |
22 |
- |
- |
(73) |
- |
(73) |
|
|
|
|
|
|
|
|
|
At 31 March 2023 |
|
1 |
242 |
496 |
22,075 |
22,814 |
|
Loss for the period |
|
- |
- |
- |
(10,888) |
(10,888) |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
Exchange translation differences on consolidation |
|
- |
- |
- |
(98) |
(98) |
|
Total comprehensive loss for the period |
|
- |
- |
- |
(10,986) |
(10,986) |
|
Exercise of options |
|
- |
16 |
(8) |
8 |
16 |
|
Credit to equity for share-based payments |
22 |
- |
- |
(7) |
- |
(7) |
|
|
|
|
|
|
|
|
|
At 31 March 2024 |
|
1 |
258 |
481 |
11,097 |
11,837 |
MINDGYM PLC CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
Year to 31 March 2024 |
Year to 31 March 2023 |
|
|
Note |
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
|
(Loss)/Profit for the financial period |
|
(10,888) |
2,935 |
|
Adjustments for: |
|
|
|
|
Amortisation of intangible assets |
12 |
1,615 |
743 |
|
Impairment of intangible asset |
12 |
6,604 |
- |
|
Depreciation of property, plant and equipment |
13 |
1,173 |
1,468 |
|
Impairment of right of use asset |
13 |
517 |
- |
|
Net finance costs |
8 |
133 |
119 |
|
Taxation (credit)/charge |
9 |
(1,259) |
29 |
|
Decrease/(Increase) in inventories |
|
13 |
(46) |
|
Decrease in trade and other receivables |
|
1,970 |
524 |
|
(Decrease) in payables and provisions |
|
(2,965) |
(1,306) |
|
Share-based payment (credit)/charge |
22 |
(7) |
(73) |
|
Cash (used in)/generated from operations |
|
(3,094) |
4,393 |
|
Net tax received/(paid) |
|
1,363 |
(766) |
|
R&D refund on account |
|
1,066 |
- |
|
Net cash (used in)/generated from operating activities |
|
(665) |
3,627 |
|
Cash flows from investing activities |
|
|
|
|
Purchase of intangible assets |
12 |
(4,151) |
(4,888) |
|
Purchase of property, plant and equipment |
13 |
(82) |
(240) |
|
Interest received |
8 |
30 |
54 |
|
Net cash used in investing activities |
|
(4,203) |
(5,074) |
|
Cash flows from financing activities |
|
|
|
|
Cash repayment of lease liabilities |
|
(1,229) |
(1,298) |
|
Issuance of ordinary shares |
|
16 |
29 |
|
Interest paid |
|
(47) |
(52) |
|
Net cash used in financing activities |
|
(1,260) |
(1,321) |
|
Net decrease in cash and cash equivalents |
|
(6,129) |
(2,768) |
|
Cash and cash equivalents at beginning of period |
|
7,587 |
10,021 |
|
Effect of foreign exchange rate changes |
|
(90) |
334 |
|
Cash and cash equivalents at the end of period |
|
1,369 |
7,587 |
|
Cash and cash equivalents at the end of period comprise: |
|
|
|
|
Cash at bank and in hand |
|
1,369 |
7,587 |
MINDGYM PLC NOTES TO THE GROUP FINANCIAL STATEMENTS
1. General information
MindGym plc ('the Company') is a public limited company incorporated in England and Wales, and its ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange ('AIM'). The address of the registered office is 160 Kensington High Street, London W8 7RG. The group consists of MindGym plc and its subsidiaries, MindGym (USA) Inc., MindGym Performance (Asia) Pte. Ltd, and MindGym (Canada) Inc. (together 'the Group').
The principal activity of the Group is to apply behavioural science to transform the performance of companies and the lives of the people who work in them. The Group does this primarily through research, strategic advice, management and employee development, employee communication, digital products and related services.
2. Summary of material accounting policies
Basis of preparation
The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2024 or 31 March 2023, but is derived from those accounts. Statutory accounts for 2023 have been delivered to the registrar of companies, and those for 2024 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial information included in this preliminary announcement has been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Group expects to distribute full accounts that comply with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.
The consolidated financial statements have been prepared on a going concern basis under the historical cost convention.
The consolidated financial statements are presented in Pounds Sterling. All values are rounded to £1,000 except where otherwise indicated.
Going concern
The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources. As at 31 March 2024, the Group had £1.4 million of cash, £7.8 million of trade and other receivables, and £2m of lease liabilities.
The Group prepares cash flow forecasts and re-forecasts regularly as part of the business planning process. The Directors have reviewed forecasted cash flows for a period of at least 12 months for the Group from the date of the approval of the financial statements and consider that the Group will have sufficient cash resources available to meet its liabilities as they fall due. These cash flow forecasts have been analysed in light of inflationary pressure and other medium-term macro-economic impacts and subjected to stress testing and scenario modelling which the Directors consider sufficiently robust. The impact of these inflationary pressures is further discussed in the Statement of the Board Chair. The scenario modelling has assessed the impact of various degrees of downturn in medium-term revenues generated. The Directors note that in a downturn scenario the Group also has the option to rationalise its cost base, including cuts to discretionary capital and overhead expenditure. The Directors consider that the required level of change to the Group's forecasted cash flows to give rise to a material risk over going concern is sufficiently remote. Furthermore, the Directors do not foresee any covenant compliance issues within the going concern period under both the base scenario and sensitivity modelling. The last measurement period for which is 30 June 2024.
As a result of these assessments, the Group's cash position and its clients predominantly comprising blue-chip corporates, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.
3. Segmental analysis
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is responsible for allocating resources and assessing performance of the business. The chief operating decision-maker has been identified as the Board. The Group has two operating segments: EMEA (comprising the United Kingdom and Singapore) and America (comprising the United States and Canada).
Both segments derive their revenue from a single business activity, the provision of human capital and business improvement solutions.
The Group's business is not highly seasonal, and the Group's customer base is diversified with no individually significant customer.
Segment results for the year ended 31 March 2024
Segment result
|
|
EMEA |
America |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Revenue |
23,729 |
21,185 |
44,914 |
|
Cost of sales |
(3,465) |
(2,729) |
(6,194) |
|
Administrative expenses |
(32,453) |
(18,281) |
(50,734) |
|
(Loss)/profit before inter-segment charges |
(12,189) |
175 |
(12,014) |
|
Inter-segment charges |
75 |
(75) |
- |
|
Operating (loss)/profit - segment result |
(12,114) |
100 |
(12,014) |
|
Finance income |
|
|
30 |
|
Finance costs |
|
|
(163) |
|
Loss before taxation |
|
|
(12,147) |
|
Adjusted (loss)/profit before tax |
EMEA |
America |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Operating (loss)/profit - segment result |
(12,114) |
100 |
(12,014) |
|
Adjusting items |
7,693 |
1,190 |
8,883 |
|
Adjusted LBIT/EBIT |
(4,421) |
1,290 |
(3,131) |
|
Finance income |
|
|
30 |
|
Finance costs |
|
|
(163) |
|
Loss before taxation |
|
|
(3,264) |
Management does not report segmental assets and liabilities internally and as such an analysis is not reported.
The mix of revenue for the year ended 31 March 2024 is set out below.
|
|
EMEA |
America |
Group |
|
Delivery |
67.1% |
67.8% |
67.4% |
|
Design |
15.0% |
10.9% |
13.0% |
|
Digital |
9.6% |
10.7% |
10.2% |
|
Licensing and certification |
2.2% |
8.2% |
5.0% |
|
Other |
4.0% |
1.7% |
2.9% |
|
Advisory |
2.1% |
0.7% |
1.5% |
The vast majority of the Group's contracts are for the delivery of services within the next 12 months. The Group has therefore taken advantage of the practical expedient in paragraph 121(a) of IFRS 15 not to disclose information about remaining performance obligations.
Segment results for the year ended 31 March 2023
Segment result
|
|
EMEA |
America |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Revenue |
23,742 |
31,269 |
55,011 |
|
Cost of sales |
(2,740) |
(3,620) |
(6,360) |
|
Administrative expenses |
(23,092) |
(22,476) |
(45,568) |
|
(Loss)/profit before inter-segment charges |
(2,090) |
5,173 |
3,083 |
|
Inter-segment charges |
5,067 |
(5,067) |
- |
|
Operating profit - segment result |
2,977 |
106 |
3,083 |
|
Finance income |
|
|
55 |
|
Finance costs |
|
|
(174) |
|
Profit before taxation |
|
|
2,964 |
|
Adjusted profit before tax |
EMEA |
America |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Operating profit - segment result |
2,977 |
106 |
3,083 |
|
Adjusted EBIT |
2,977 |
106 |
3,083 |
|
Finance income |
|
|
55 |
|
Finance costs |
|
|
(174) |
|
Profit before taxation |
|
|
2,964 |
Management does not report segmental assets and liabilities internally and as such an analysis is not reported.
The mix of revenue for the year ended 31 March 2023 is set out below.
|
|
EMEA |
America |
Group |
|
Delivery |
60.2% |
60.6% |
60.3% |
|
Design |
19.0% |
15.7% |
17.2% |
|
Digital |
13.4% |
12.8% |
13.1% |
|
Licensing and certification |
3.3% |
7.5% |
5.6% |
|
Other |
2.4% |
2.3% |
2.4% |
|
Advisory |
1.7% |
1.1% |
1.4% |
The vast majority of the Group's contracts are for the delivery of services within the next 12 months. The Group has therefore taken advantage of the practical expedient in paragraph 121(a) of IFRS 15 not to disclose information about remaining performance obligations.
4. Operating (loss)/profit
Operating (loss)/profit is stated after charging/(crediting):
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
External coach costs |
4,573 |
4,960 |
|
Staff costs (Note 7) |
31,789 |
34,962 |
|
Payroll restructuring costs included in adjusted items |
1,722 |
- |
|
Other restructuring costs included in adjusted items |
40 |
- |
|
Amortisation of intangible assets |
1,615 |
743 |
|
Impairment - Digital Asset |
6,604 |
- |
|
Depreciation of property, plant and equipment |
1,173 |
1,468 |
|
Impairment - Lease |
517 |
- |
|
Short-term and low-value lease expense |
14 |
18 |
|
Impairment/(Write-back) of trade receivables |
11 |
(106) |
5. Adjusting items
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Restructuring costs |
1,762 |
- |
|
Impairment of right of use asset |
517 |
- |
|
Impairment of intangibles |
6,604 |
- |
|
|
8,883 |
- |
Restructuring costs in the year ended 31 March 2024 include redundancy costs and associated legal costs related to the headcount reduction exercise undertaken to reduce the cost base.
Impairment of intangible assets are excluded from the adjusted results of the Group since the costs are one-off charges. These relate to digital assets not in use that are no longer being developed.
The Group tested right-of-use assets for impairment and recognised an impairment loss on a leased asset.
6. Auditor remuneration
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Fees for audit of the Company and consolidated financial statements |
150 |
134 |
|
Fees for audit of the Company's subsidiaries pursuant to legislation |
26 |
24 |
|
Total audit fees |
176 |
158 |
|
Tax compliance services |
- |
20 |
|
Tax advisory services |
- |
- |
|
Other services |
18 |
15 |
|
Total fees payable to the auditor |
194 |
193 |
7. Employees
Staff costs were as follows:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Wages and salaries |
28,059 |
31,036 |
|
Social security costs |
2,678 |
2,944 |
|
Pension costs - defined contribution plans |
1,059 |
1,055 |
|
Share-based payments |
(7) |
(73) |
|
|
31,789 |
34,962 |
|
Restructuring payroll costs included in adjusted items |
1,722 |
- |
|
|
33,511 |
34,962 |
The average number of the Group's employees by function was:
|
|
31 March 2024 |
31 March 2023 |
|
Delivery |
211 |
218 |
|
Support |
79 |
79 |
|
Digital |
41 |
44 |
|
|
331 |
341 |
The year-end number of the Group's employees by function was:
|
|
31 March 2024 |
31 March 2023 |
|
Delivery |
175 |
241 |
|
Support |
79 |
86 |
|
Digital |
16 |
46 |
|
|
270 |
373 |
Key management personnel include all Directors and a number of senior managers across the Group who together have responsibility and authority for planning, directing and controlling the activities of the Group. The compensation paid to key management personnel for services provided to the Group was:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Salaries, bonuses and other short-term employee benefits |
2,823 |
2,624 |
|
Post-employment benefits |
84 |
72 |
|
Termination benefits |
20 |
- |
|
Share-based payments |
(3) |
(109) |
|
Total compensation |
2,924 |
2,587 |
Details of Directors' remuneration and share options are set out in the Annual Report on Remuneration.
8. Net finance costs
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Finance income |
|
|
|
Bank interest receivable |
30 |
54 |
|
Finance lease income |
- |
1 |
|
|
30 |
55 |
|
Finance costs |
|
|
|
Bank interest payable |
(47) |
(52) |
|
Lease interest |
(116) |
(122) |
|
|
(163) |
(174) |
|
|
(133) |
(119) |
9. Tax
The tax (credit)/charge for the year comprises:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
UK current tax |
(463) |
- |
|
UK adjustment in respect of prior periods |
(1,864) |
- |
|
Withholding tax |
2 |
8 |
|
Foreign current tax |
16 |
73 |
|
Foreign adjustment in respect of prior periods |
105 |
322 |
|
Total current tax (credit)/charge |
(2,204) |
403 |
|
Deferred tax - current year |
(2,350) |
(131) |
|
Deferred tax - adjustment in respect of prior periods (R&D claims) |
3,295 |
(154) |
|
Effect of changes in tax rates |
- |
(89) |
|
Total deferred tax charge/(credit) |
945 |
(374) |
|
Total tax (credit)/charge |
(1,259) |
29 |
During FY24, Management took the decision to resubmit the UK Corporation Tax returns for FY22 and FY23 to surrender tax losses for cash. This has resulted in a prior year adjustment for both current and deferred tax of £1.9m and £3.3m respectively.
No current or deferred tax has been recognised in Equity in the years ended 31 March 2023 or 31 March 2024.
The tax (credit)/charge for the year can be reconciled to accounting (loss)/profit as follows:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
(Loss)/profit before tax |
(12,147) |
2,964 |
|
Expected tax (credit)/charge based on the standard rate of tax in the UK of 25% (2023: 19%) |
(3,037) |
563 |
|
Differences in overseas tax rates |
7 |
11 |
|
Expenses not deductible for tax purposes |
23 |
846 |
|
Adjustments to tax in respect of prior periods |
1,536 |
168 |
|
Enhanced R&D deduction |
(535) |
(1,466) |
|
Tax rate changes |
- |
(89) |
|
Losses surrendered under SME regime |
694 |
- |
|
Other tax adjustments |
53 |
(4) |
|
Total tax (credit)/charge |
(1,259) |
29 |
The main categories of deferred tax assets recognised by the Group are:
|
|
Tax losses |
Intangible assets |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 April 2022 |
4,049 |
(1,526) |
323 |
2,846 |
|
Charged to income |
1,205 |
(848) |
15 |
372 |
|
Exchange differences |
- |
- |
11 |
11 |
|
At 31 March 2023 |
5,254 |
(2,374) |
349 |
3,229 |
|
Credited to income |
(1,704) |
924 |
(166) |
(946) |
|
Exchange differences |
- |
- |
(2) |
(2) |
|
At 31 March 2024 |
3,550 |
(1,450) |
181 |
2,281 |
From 1 April 2023 the main corporation tax rate increased to 25% (2023: 19%). This increase was substantially enacted at the balance sheet date.
The Group has recognised £3.6 million of deferred tax assets relating to carried forward tax losses. These losses have been recognised as it is probable that future taxable profits will allow these deferred tax assets to be recovered. The Group has performed a continuing evaluation of its deferred tax asset valuation allowance on an annual basis to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.
The Group has recognised a corresponding £1.5 million of deferred tax liabilities relating to timing differences on intangible assets.
Other deferred tax assets include deferred tax on shared based payments in the UK and other temporary timing differences.
10. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the earnings attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the year. The Company has potentially dilutive shares in respect of the share-based payment plans (see Note 22).
|
|
31 March 2024 |
31 March 2023 |
|
Weighted average number of shares in issue |
100,186,450 |
100,143,571 |
|
Potentially dilutive shares (weighted average) |
7,921,037 |
3,141,506 |
|
Diluted number of shares (weighted average) |
108,107,487 |
103,285,077 |
|
|
|
|
|
|
31 March 2024 |
31 March 2023 |
||||
|
|
|
Basic EPS |
Diluted EPS |
|
Basic EPS |
Diluted EPS |
|
|
£'000 |
pence |
Pence |
£'000 |
pence |
pence |
|
Net (loss)/profit attributable to shareholders |
(10,888) |
(10.86) |
(10.86) |
2,935 |
2.93 |
2.84 |
|
Adjusted (loss)/profit attributable to shareholders |
(4,262) |
(4.25) |
(4.25) |
2,935 |
2.93 |
2.84 |
11. Dividends
No dividends have been paid or proposed for the year ended 31 March 2024 (2023: nil).
12. Intangible assets
|
|
Patents |
Development costs |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
At 1 April 2022 |
63 |
10,384 |
10,447 |
|
Additions |
58 |
4,830 |
4,888 |
|
Disposals |
- |
(41) |
(41) |
|
At 31 March 2023 |
121 |
15,173 |
15,294 |
|
Additions |
23 |
4,128 |
4,151 |
|
At 31 March 2024 |
144 |
19,301 |
19,445 |
|
Amortisation |
|
|
|
|
At 1 April 2022 |
63 |
2,209 |
2,272 |
|
Amortisation charge |
3 |
740 |
743 |
|
Disposals |
- |
(41) |
(41) |
|
At 31 March 2023 |
66 |
2,908 |
2,974 |
|
Amortisation charge |
7 |
1,608 |
1,615 |
|
Impairment |
- |
6,604 |
6,604 |
|
At 31 March 2024 |
73 |
11,120 |
11,193 |
|
Net book value |
|
|
|
|
At 31 March 2023 |
55 |
12,265 |
12,320 |
|
At 31 March 2024 |
71 |
8,181 |
8,252 |
Development cost additions in the year to 31 March 2024 include software development costs directly incurred in the creation of new digital assets.
In October 2023 the Group decided to significantly reduce the amount invested in development projects. The decision led to a potential indicator of impairment and triggered a review of all intangible digital assets. Each cash generating unit (CGU) was assessed and tested for impairment. The recoverable amount was estimated based on its value in use. For digital assets that were not yet complete and where no further investment is expected, the Directors determined the recoverable amount of the asset to be nil and therefore the assets were impaired in full. An impairment charge of £6.6 million was recognised in the Consolidated Statement of Comprehensive Income.
At 31 March 2024, unfinished assets were reviewed for impairment using a detailed net present value ('NPV') calculation, including sensitivity analysis of 4 scenarios. In all scenarios, the NPV exceeded the carrying value of the incomplete assets and therefore the Directors determined that no further impairment should be recognised.
13. Property, plant and equipment
|
|
Right-of-use asset |
Leasehold improvements |
Fixtures, fittings and equipment |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
At 1 April 2022 |
4,088 |
519 |
1,509 |
6,116 |
|
Additions |
1,937 |
2 |
238 |
2,177 |
|
Exchange differences |
164 |
17 |
46 |
227 |
|
At 31 March 2023 |
6,189 |
538 |
1,793 |
8,520 |
|
Additions |
36 |
- |
82 |
118 |
|
Disposals |
- |
- |
(517) |
(517) |
|
Exchange differences |
(57) |
(6) |
(17) |
(80) |
|
At 31 March 2024 |
6,168 |
532 |
1,341 |
8,041 |
|
Depreciation |
|
|
|
|
|
At 1 April 2022 |
2,184 |
287 |
830 |
3,301 |
|
Depreciation charge |
1,013 |
86 |
369 |
1,468 |
|
Exchange differences |
38 |
1 |
21 |
60 |
|
At 31 March 2023 |
3,235 |
374 |
1,220 |
4,829 |
|
Depreciation charge |
772 |
83 |
318 |
1,173 |
|
Impairment |
517 |
- |
- |
517 |
|
Disposals |
- |
- |
(517) |
(517) |
|
Exchange differences |
(47) |
(1) |
(13) |
(61) |
|
At 31 March 2024 |
4,477 |
456 |
1,008 |
5,941 |
|
Net book value |
|
|
|
|
|
At 31 March 2023 |
2,954 |
164 |
573 |
3,691 |
|
At 31 March 2024 |
1,691 |
76 |
333 |
2,100 |
Following the pandemic and with the move to hybrid working, a significant proportion of the US workforce work remotely and therefore the Directors deemed it appropriate to vacate a proportion of the New York office. In doing this, management considered there to be two lease components for the right-of-use asset. The lease component that is no longer accessible and not in use by the business triggered an impairment review. Accordingly, management estimated the recoverable amount of the CGU to be nil. This resulted in an impairment of the right of use asset by £517,000. This was recognised in the Consolidated Statement of Comprehensive Income.
14. Inventories
|
|
31 March 2024 |
31 March 2023 |
|
|
|
£'000 |
|
Finished goods |
40 |
53 |
Write-down of inventory amounted to £1,000 (2023: £32,000).
The cost of inventories recognised as an expense and included in cost of sales amounted to £558,000 (2023: £392,000).
15. Trade and other receivables
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Non-current |
|
|
|
Prepayments in respect of property deposits |
- |
230 |
|
|
- |
230 |
|
Current |
|
|
|
Trade receivables |
6,005 |
6,730 |
|
Less provision for impairment |
(113) |
(102) |
|
Net trade receivables |
5,892 |
6,628 |
|
Other receivables |
27 |
80 |
|
Prepayments in respect of property deposits |
226 |
- |
|
Prepayments |
796 |
1,125 |
|
Accrued income |
846 |
1,694 |
|
|
7,787 |
9,527 |
Trade receivables have been aged with respect to the payment terms as follows:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Not past due |
5,617 |
6,282 |
|
Past due 0-30 days |
313 |
336 |
|
Past due 31-60 days |
39 |
74 |
|
Past due 61-90 days |
35 |
12 |
|
Past due more than 90 days |
1 |
26 |
|
|
6,005 |
6,730 |
The movement in the allowance for impairment losses was:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
At the beginning of the period |
102 |
212 |
|
Addition/(Write-back) |
11 |
(110) |
|
Utilisation of provision |
- |
(5) |
|
Foreign exchange adjustment |
- |
5 |
|
At the end of the period |
113 |
102 |
The Group has applied the simplified approach to measuring expected credit losses, as permitted by IFRS 9, and recognises a loss allowance based on the lifetime expected credit loss.
16. Trade and other payables
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Trade payables |
1,172 |
1,257 |
|
Other taxation and social security |
1,525 |
744 |
|
Other payables |
323 |
396 |
|
Accruals |
3,055 |
4,606 |
|
Deferred income |
2,399 |
4,420 |
|
|
8,474 |
11,423 |
17. Lease liability
The lease liabilities included in the statement of financial position are:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Current |
980 |
1,121 |
|
Non-current |
1,038 |
1,988 |
|
|
2,018 |
3,109 |
The related right-of-use asset is disclosed in Note 13.
The movements in the lease liability were as follows:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
At the beginning of the year |
3,109 |
2,205 |
|
Additions |
41 |
1,948 |
|
Finance cost |
116 |
122 |
|
Lease payments |
(1,229) |
(1,298) |
|
Exchange differences |
(19) |
132 |
|
At the end of the year |
2,018 |
3,109 |
The maturity analysis of the contractual undiscounted cash flows is:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Less than one year |
1,045 |
1,227 |
|
Between one and five years |
1,098 |
2,094 |
|
Total future lease payments |
2,143 |
3,321 |
|
Total future interest payments |
(125) |
(212) |
|
Total lease liability |
2,018 |
3,109 |
18. Redeemable preference shares
The Company allotted and issued 50,000 redeemable preference shares of £1.00 each to Octavius Black in June 2018. The shares are fully paid up. Under the Articles of Association, the Company may redeem the preference shares at their nominal amount at any time specified by either the Directors or the preference share holder. The preference share capital, however, counts towards the £50,000 minimum share capital required under the Companies Act 2006 and cannot therefore be redeemed unless the Company increases its other share capital. The preference shares are non-voting, give no rights to dividends or interest and entitle the holder to the return of the nominal value on a winding up.
19. Borrowings
The Group entered into a £10 million debt facility (£6 million Revolving Credit Facility, £4 million accordion) on 30 September 2021 which matures after three years. The facility remains undrawn as at 14 June 2024.
20. Financial instruments and financial risk management
Financial instruments by category
Trade and other receivables (excluding prepayments), cash and cash equivalents and trade and other payables are initially measured at fair value and subsequently held at amortised cost.
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Net trade receivables |
5,892 |
6,628 |
|
Other receivables |
27 |
80 |
|
Prepayments in respect of property deposits |
- |
230 |
|
Cash and cash equivalents |
1,369 |
7,587 |
|
Financial assets at amortised cost |
7,288 |
14,525 |
|
Trade payables |
1,172 |
1,257 |
|
Other payables |
323 |
396 |
|
Lease liabilities |
2,018 |
3,109 |
|
Financial liabilities at amortised cost |
3,513 |
4,762 |
The Group holds no assets or liabilities that are held at fair value through income statement or OCI.
As the trade and other receivables and trade and other payables have a maturity of less than one year, the notional amount is deemed to reflect the fair value.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure.
The Group's sources of funding currently comprise cash flows generated from operations, and equity contributed by shareholders. The Group has no borrowings and is not subject to any externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders to the extent allowed by the Company's articles or issue new shares.
Financial risk management
The Group's risk management is overseen by the Audit and Risk Committee. The Group is exposed to a variety of financial risks that result from its operations, including credit risk, liquidity risk and foreign currency risk. Since the Group has no debt it is not significantly exposed to interest rate risk. The Group has not entered into any derivative transactions, such as interest rate swaps or forward foreign exchange contracts.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks, or the methods used to measure them from previous periods unless otherwise stated in this note.
Credit risk
Credit risk arises principally from the Group's trade receivables from customers and monies on deposit with financial institutions.
Credit risk on trade receivables is considered to be relatively low as the Group's customers mainly consist of large credit-worthy organisations. Credit exposure is spread over a large number of customers and so there is no significant concentration of credit risk. Outstanding and overdue balances are regularly reviewed and resulting actions are put in place on a timely basis. The Group establishes an allowance for impairment. This is based on a review of individual balances taking into account the results of credit control communications and our knowledge about the customer relationship. See Note 15 Trade and other receivables for further information on ageing and impairment of trade receivables.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties are accepted, and management maintain a close relationship with the Group's banks.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Trade receivables |
5,892 |
6,628 |
|
Other receivables |
27 |
80 |
|
Prepayments in respect of property deposits |
- |
230 |
|
Cash and cash equivalents |
1,369 |
7,587 |
|
At the end of the period |
7,288 |
14,525 |
Liquidity risk
The Group ensures, as far as possible, that it has sufficient funds to meet foreseeable operational expenses. Cash flow forecasting is performed by Group Finance who monitor rolling forecasts of the Group's liquidity requirements. Such forecasting takes into consideration expected cash receipts, regular spending and payment of taxes such as VAT, payroll and corporate income tax.
Currently, the Group's liquidity risk is low as it has a surplus of cash in all entities and the £10 million debt facility available (set out in Note 19). All Group liabilities in the current and prior year are due within three months of the reporting date, apart from lease liabilities. The maturity of the lease liability is set out in Note 17.
Foreign currency risk
The Group operates internationally and is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than Sterling. The currencies giving rise to this risk are primarily the US Dollar and the Euro. Where possible the exposure is mitigated by a natural hedge. For example, US Dollar revenues are partially matched by US Dollar costs in the US subsidiary.
The Group holds cash in the UK in Sterling, Euro and US Dollar bank accounts and in the USA in US Dollar and Canadian Dollar bank accounts.
Trade receivables and cash and cash equivalents are analysed by currency as follows:
|
|
GBP |
USD |
EUR |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 31 March 2024 |
|
|
|
|
|
|
Net trade receivables |
2,884 |
2,324 |
658 |
26 |
5,892 |
|
Cash and cash equivalents |
306 |
793 |
241 |
29 |
1,369 |
|
|
|
|
|
|
|
|
At 31 March 2023 |
|
|
|
|
|
|
Net trade receivables |
2,981 |
3,070 |
351 |
226 |
6,628 |
|
Cash and cash equivalents |
4,659 |
2,631 |
136 |
161 |
7,587 |
The Group does not currently use forward foreign exchange contracts or currency options to hedge currency risk.
21. Share capital
|
|
31 March 2024 |
31 March 2024 |
31 March 2023 |
31 March 2023 |
|
|
|
Cost |
|
Cost |
|
|
Number |
£'000 |
Number |
£'000 |
|
Ordinary shares of £0.00001 at 1 April |
100,167,584 |
1 |
100,105,660 |
1 |
|
Issue of shares to satisfy options |
30,880 |
- |
61,924 |
- |
|
Ordinary shares of £0.00001 at 31 March |
100,198,464 |
1 |
100,167,584 |
1 |
An Employee Benefit Trust ('EBT') has been established in connection with the Group's Share Incentive Plan. The movements in own shares held by the Employee Benefit Trust and the market value of the shares held at the year-end are shown below.
|
|
31 March 2024 |
31 March 2024 |
31 March 2023 |
31 March 2023 |
|
|
|
Cost |
|
Cost |
|
|
Number |
£'000 |
Number |
£'000 |
|
As at 1 April |
111,655 |
- |
111,655 |
- |
|
Issue of new shares to EBT |
- |
- |
- |
- |
|
Removed from the Trust |
(21,304) |
- |
- |
- |
|
Ordinary shares of £0.00001 at 31 March |
90,351 |
- |
111,655 |
- |
|
Market value at 31 March |
|
62 |
|
76 |
22. Share-based payments
The Group awards options to selected employees under a Long-Term Incentive Share Option Plan ('LTIP'). The options granted to date vest subject only to remaining employed up to the vesting date. Unexercised options do not entitle the holder to dividends or to voting rights.
The Group operates the MindGym plc Share Incentive Plan (SIP). An initial award of £1,000 of free shares was granted in October 2018 to all employees at the IPO price of 146 pence. The shares are held in an employee benefit trust and vested after three years subject only to remaining employed up to the vesting date. The holder was entitled to dividends over the vesting period. Many employees elected to leave their shares in the trust for a further two years for tax purposes.
On 30 September 2019, the Group launched a Save As You Earn scheme ('SAYE') and an Employee Share Purchase Plan ('ESPP') for all eligible employees in the UK and USA respectively. New schemes have been launched annually since 2019.
The total share-based payments expense was:
|
|
31 March 2024 |
31 March 2023 |
|
|
£'000 |
£'000 |
|
Equity settled share-based payments |
(7) |
(73) |
23. Controlling party
The Group was controlled by O. Black and J. Cash by virtue of their joint shareholding in the Company throughout the period.
There were the following related party transactions during the year and balances at the end of the year:
· Key management compensation as disclosed in Note 7.
24. Events after the reporting period
There were no post-balance sheet events.
[1] Adjusted EBITDA, is earnings before interest, tax, depreciation and amortisation, adjusted to eliminate the impact of exceptional charges in the period.