9 April 2024

Microlise Group plc

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

Results for the year ended 31 December 2023

Strong performance driven by consistent strategic execution

Microlise Group plc (AIM: SAAS), a leading provider of transport management software to fleet operators, announces its audited results for the twelve months ended 31 December 2023.

Financial Highlights

·    The Group has driven an increase in total revenue to £71.7m (13%) for the 12 months ended 31 December 2023 (FY22: £63.2m).

·    Growth in the period was a result of continued strong demand from Original Equipment Manufacturer (OEM) customers and increased revenue from direct customers towards the end of the year as an improvement of new vehicle availability in H2 enabled the Company to deliver against its record orderbook.

·    Recurring revenue +11% to £45m, ahead of market expectations, supported by the renewal of several major customer contracts and new customer wins (FY22: £40.5m).

·    Gross profit +16% to £43.6m (FY22: £37.6m), at a gross profit margin of 61% (FY22: 60%) due to the increased gross margin % from both recurring and non-recurring revenues in the period.

·    Adjusted EBITDA +15% to £9.4m (FY22: £8.2m), ahead of market expectations. Adjusted EBITDA percentage has increased marginally to 13.1% (FY22: 13.0%). Operating margins flat following the previously announced commencement of the Group's investment programme to improve its go-to-market and product offering and support further growth.  

·    Continued strong underlying cash conversion exceeding 90% reflecting growth in subscription revenue and continued good working capital management.

·    Robust balance sheet with £16.8m cash and cash equivalents (FY22: £16.7m), £10m undrawn Revolving Credit Facility and £20m accordion facility available until April 2027 with the option to extend.

·    Maiden final ordinary dividend of 1.725 pence per share (FY22: nil) payable on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.

Strategic and operational highlights

·    Subscriptions +6.8%, driven by continued growth in our existing customers together with new customer wins (FY22: 599,000).

·    Annual recurring revenue (ARR) run rate +12% to £47.7m, of which 11.8% represented organic growth at 31 December 2023 from £42.6m on 31 December 2022.

·    The Group added over 450 new customers in the period and long-term contract customer churn rate by value remained very low at 0.7% (FY22: 0.4%)

Current Trading & Outlook

·    Microlise enters FY24 with good momentum driven by consistent strategic execution. Looking ahead, the Board expects organic growth to improve from current levels as we move through the year supported by a healthy orderbook and pipeline of opportunities across OEM and direct customer divisions. Operating margins are expected to trend upwards in FY24 and beyond, as we focus on careful management of the cost base and efficiently scaling the Group.

·    We started the new financial year in line with our expectations and remain very confident with the opportunities we have in front of us, and in our ability to deliver against market expectations.

·    Recent acquisitions of Transportation Management System (TMS) providers, Enterprise Software Systems and Vita Software, as well as vulnerable road user app supplier K-Safe are trading in-line with our expectations.

Nadeem Raza, CEO of Microlise, commented: "Microlise performed well in FY23, delivering double digit revenue growth, increased profitability and strong cash flows. During the period, we secured the renewal of several major customer contracts and significant new logo wins. We are continuing to build a resilient business to deliver sustained, efficient growth having made three key acquisitions that have enabled us to improve and expand our product offering.

Our focus remains on scaling our business and increasing margins through consistently improving the efficiency of our business. With the supply chain issues in the first half of the year now fully behind us, and with a strong order book and healthy pipeline, we look forward to 2024 with confidence."

For further information, please contact:

About Microlise

Established in 1982, Microlise Group Plc is a leading SaaS provider of Transport and fleet management solutions. Its technology is designed to help businesses improve efficiency, reduce emissions, lower costs, and increase safety on the road.

With a range of products and services used by more than 400 enterprise clients globally, Microlise helps companies of all shapes and sizes - across a wide range of industries - to better manage their entire operation.

Backed by a team of experienced professionals who provide excellent customer service, the Group has won a number of awards, including three Queens Awards for Innovation (2019, 2020).

Headquartered in the United Kingdom, the company also has offices in France, Australia, and India with a global staff base of more than 750 industry professionals. 

Handling over 640,000 subscriptions annually, Microlise joined the Alternative Investment Market (AIM) in 2021, qualifying for the London Stock Exchange's Green Economy Mark.

Chairman's Statement

Microlise has delivered another strong performance in FY23. We started the financial year with considerable momentum, building upon the success of FY22 to achieve another record revenue year.

Revenue grew 13% to £71.7m for the 12-month period ended 31 December 2023 (FY22: £63.2m), while ARR grew 12% to £47.2m (FY22: £42.6m). Adjusted EBITDA grew 15% during the period, ahead of market expectations. Operating profit increased 3% to £2.3m (FY22:£2.2m).

The Group's financial performance in FY23 exceeded the Board's expectations, driven by continued high demand from OEM customers and, towards the end of the year, increased revenue from direct customers. This was facilitated by an improvement in new vehicle availability in the second half of the year, enabling the Company to deliver against its record order book.

During the first half of the year, the Company, alongside the wider transport industry, continued to contend with global supply chain challenges, which in turn impacted the availability of new vehicles. Throughout the second half of the year, we saw these issues significantly diminish as the back log of demand was fulfilled. As we enter FY24, it is reassuring to note that both these challenges have been resolved.

We were pleased to announce the acquisitions of two Transport Management Systems (TMS) companies during the period, Vita Software on 14 March 2023 and Enterprise Software Systems (ESS) on 30 November 2023, which completed in January 2024. A third acquisition of road safety company, K-Safe, completed in December 2023 and was announced post period end in January 2024. We're already seeing the positive impact of these acquisitions, with successful sales of Vita software's TMS offering and a growing pipeline for the ESS and Flare Aware (K-Safe Product) products with our existing customers.

Our strategic focus for the year will be on progressing the integration of our recent acquisitions into the Microlise product architecture, enabling us to ensure our customers benefit through the broader use of our comprehensive integrated product range. In addition, we will continue to focus on driving efficiency and enhancing profitability within the business.

At the time of the Company's IPO in 2021 the Board stated that given the cash generative nature of the Group's activities it would, if commercially prudent to do so, commence the payment of dividends in the medium term. Having undertaken a review of the Group's capital allocation policy, and the availability of resources and distributable reserves, the Board has determined that it is now appropriate to commence the distribution of dividends to shareholders. The Board has therefore declared a final dividend for the 2023 financial year of 1.725 pence per share and will henceforth adopt a progressive dividend policy.

As well as returning capital to shareholders, the Board will continue to prioritise balance sheet strength which will allow the Group to continue to invest in its' technology platform, infrastructure and security whilst retaining an ability to pursue selective acquisitions which accelerate the Company's strategic development.

If approved by shareholder at May's Annual General Meeting on 22 May 2024, the dividend will be paid on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.

Microlise has an exceptionally talented team and our progress during the year was made possible as a result of their hard work, expertise and passion. I would like to thank everyone for their dedication and contribution to the ongoing success of the business. We look forward to a successful 2024.

Jon Lee, Non-Executive Chairman

CEO Statement

Microlise delivered a strong performance in FY23, outperforming both our internal and market expectations. The supply chain issues experienced in prior years are now firmly behind us and lead times on new vehicles are no longer extended, such that the market has fully returned to normality. Sales to OEM customers have been especially positive and this performance has continued into 2024, providing confidence that the year ahead will be another record year for OEM sales.

Microlise added 450 new customers during the year, an 80% increase over the 250 customers signed in FY22. Notable names signed during the period included BCA/ECM, the UK's largest used vehicles business, and the retailer Woolworths Australia.

In addition, we extended 40 contracts with existing large enterprise customers. Examples include Sainsbury's, Cemex, Sports Direct and Bidfood. The critical importance of our solutions to our customers' operations also resulted in our churn rate remaining extremely low at 0.7%.

Aside from organic growth we also commenced a series of acquisitions in FY23. Microlise expanded its offering into the Transport Management Solutions (TMS) space with two acquisitions; Vita Software, completed in March 2023, and Enterprise Software Solutions (ESS), announced in November 2023 and completed post year end in January 2024. Transport Management Solutions go beyond the vehicle to provide a suite of associated services to fleet logistics operators, such as resource and transport costing, subcontractor management and invoicing solutions. The TMS acquisitions have both been immediately earnings enhancing, with the Vita TMS already resulting in the successful sale to a new customer, Crowfoots.

In December 2023, Microlise also completed the acquisition of K-Safe, the provider of a safety product which warns drivers that cyclists are near their vehicle, providing them with the position of the cyclist. This innovative solution is hugely important in helping drivers avoid common accidents caused by a lack of visibility where bikes are concerned.

This product also takes Microlise into the last mile of delivery, a new market for Microlise, such that our offerings now provide end-to-end coverage of the road delivery sector from the warehouse to the consumer. K-Safe has brought with it a number of new customers in the last mile delivery space, including Deliveroo, JustEat and Voi and engagement with them to date has been very positive.

Market

At the beginning of 2023, our business and that of our customers continued to be negatively affected by global supply chain issues and chip shortages, which in turn led to greatly extended lead times on new vehicles. By the end of the first half of the year, the global supply chain issues and chip shortages had greatly diminished. However, lead times on new vehicles had not improved at this stage owing to a three-to-six-month time lag between vehicle manufacturer's receipt of now-available components and subsequent production of vehicles.

Throughout the second half of the year, we have experienced steady market growth as conditions continued to improve. The time lag on new vehicles has now all but disappeared such that the market has now returned to pre-pandemic conditions. With a substantial backlog of orders across the logistics market, we are now in an environment of robust and sustained growth, despite the less certain macro-economic backdrop.

Prior supply issues also led to many smaller companies within the logistics market entering administration and this has benefited larger companies which have been able to consolidate these distressed businesses into their operations. This has accelerated the growth of the larger companies, and these are typical of Microlise's customer base. As such, Microlise now finds itself extremely well positioned, firmly within the sweet spot of the growing logistics market.

Customer Base

During the year we continued to focus on securing and retaining customers as a priority. This resulted in us securing 450 new customers, an 80% increase over 2022. These included new contracts with Irish logistics company, McCulla; BCA, the UK's largest used vehicle business; and UK nationwide logistics company LF&E Refrigerated Transport.

Further afield, and in line with our strategic objective of geographic expansion, significant new contracts were signed with two of Australia's leading grocery retailers in September 2023, one of which further expanded its engagement in December 2023. These contracts demonstrate the clear traction we are developing in our target markets, and we are hopeful of providing updates on further geographic growth in the near future.

In addition, we signed 40 renewals with existing customers including Tesco, Bidfood and Pall-ex.

During the period we adapted our software solutions to enable compatibility with certain third-party products. This has removed barriers for potential customers who might otherwise be unable to utilise our solutions, thereby increasing our addressable market. It is also expected that this development will alter our revenue mix resulting in a positive effect on margins over time.

Our low customer churn reflects the essential nature of Microlise's solutions to its customers, the high regard in which we are held, and the loyalty of our valued customer base.

Product Offering and M&A

Microlise's solutions help our customers make the most efficient use of their assets, reducing fuel, the time drivers are on the road, wear and tear on vehicles, accidents and more.

During 2023 Microlise has expanded its product set to encompass more elements of the logistics process such that the Company offers a true end to end suite of products from the warehouse direct to the end consumer.

In March 2023, in line with the Company's strategic growth plan, Microlise completed its first acquisition since flotation with an initial cash payment of £1.86m for Vita Software, a Transport Management Solutions (TMS) provider. This expanded the Group's suite of technology solutions beyond the vehicle to include such offerings as resource and transport costing, subcontractor management and invoicing solutions and is applicable to fleets of any size. Immediately earnings enhancing, the product has performed well since acquisition and has resulted in numerous upsells and cross-sells.

Microlise complemented this with the acquisition of ESS, also a provider of Transport Management Solutions, announced in November 2023 and completed post year end. ESS was purchased for a maximum net consideration of £8.5m in cash, having delivered £5.1m revenue, of which 75% is recurring, and £1m adjusted EBITDA, in the year to 31 August 2023. This further strengthens Microlise's TMS credentials and is expected to accelerate sales of its TMS solutions. In December 2023, Microlise also acquired the assets of K-Safe Limited for £0.14m, the parent company to the road safety products Flare and Flare Aware. Flare is a multi-award-winning platform with over 3.5 million regular users of its app. This helps leading brands such as Deliveroo and Just Eat, as well as any individual on a two-wheeled vehicles (cyclists, motorcyclists, e-scooters), to better understand and react to mobility risk and safety issues.

Flare Aware is a dynamic driver hazard warning system, jointly developed with Microlise, which utilises the data captured from the Flare mobile app user network, to provide awareness and alerts to the drivers of vehicles when they are near cyclists and motorcyclists using the Flare app.

K-Safe has brought Microlise into the last mile of delivery services as well as into the two-wheel vehicle sector. The acquisition will further improve Microlise's safety solutions while at the same time adding some of the biggest names in consumer delivery services as customers.

Microlise's prime focus at present is on ensuring the full integration, and interoperability of the solutions, of its latest acquisitions. However, the Company remains alert to further acquisition opportunities, particularly internationally, both in markets in which we already operate as well as new geographies.

Strategic Focus

We are currently focused on the following core strategic objectives:

Bringing our three recent acquisitions into the Microlise architecture

This is progressing well with fully integrating our acquisitions will enable us to more effectively upsell and cross-sell products and attract new customers. This programme of work is externally named Microlise Complete, as we continue to drive our USP of being an end-to-end integrated solution for transport operators.

Combining all of our products into a single, seamlessly integrated product suite

Our R&D team is currently developing our systems architecture across all of our products to ensure each is fully integrated. This will enable data to be shared across all products such that, for example, when driver information is updated in one product it automatically updates in others.

In addition, it will allow for common functionality across the suite of programmes so that, for example, there is a single login from which customers can use, and purchase, multiple products. This will make our product suite still more attractive to potential customers while also facilitating the sales of more products to existing customers.

Improving margins through greater efficiencies

We have multiple initiatives underway to improve the efficiency of our business by streamlining internal processes, allowing us to scale the business more efficiently. Details on these initiatives are in part commercially sensitive but our aim is to increase margins.

Continued investment into product development

We will continue to invest heavily into product development to ensure that we remain at the forefront of our industry, bringing new, innovative solutions to our platform that benefit our customers.

Continued investment into security measures for our blue-chip customer base

A number of our clients have come under heavy attack from Ransomware and so we have continued to invest in replacement enterprise firewalls. We also continue to leverage our Exposure Management Platform with Monitoring Dashboards for Software Vulnerabilities. These attacks have not impacted Microlise directly but their effects on our clients could cause major disruption to their operations. Logistics companies are relied upon to deliver goods in a very short space of time and cannot afford for their operations to be put on hold. Therefore assurance and resilience of our business-critical systems are of paramount importance to our customers. Of all of our strategic initiatives, this is responsible for the largest capital spend but the outlay is necessary to ensure we both attract and retain customers.

International Expansion

During the period, we have remained focussed on international expansion, and we have made solid progress across a number of key geographies, particularly in Australia and New Zealand where we signed two new contracts with leading grocery retailers. This demonstrates the market leading nature of our products in the region and we are therefore committing increased investment to our sales function to ensure we further accelerate growth and capture all available opportunities.

M&A

M&A remains a core part of our strategy and we continue to see a robust pipeline of opportunities. We continue to assess further acquisition opportunities, with a current focus on international business, both in new geographies and in those in which we already operate, and will act appropriately should they align with our immediate and long-term strategic focus.

Microlise Transport Conference

The 2024 Microlise Transport Conference took place on 19 March at the Coventry Building Society Arena. 1200 delegates attended the event making it the biggest and most successful conference in our history. 14 keynote speakers addressed the audience, including MP Guy Opperman (Minister for Roads and Local Transport) and representatives from JCB, showcasing their hydrogen combustion engine technology. In addition, there were four further stages at the show featuring talks from SMEs from across the logistics industry, and OEMs, such as DAF, Mercedes-Benz and Volvo showcasing their latest electric vehicle offerings to delegates.

People

In August 2023 Shenny Remtulla was appointed to the senior leadership team as Strategy and M&A Director, with responsibility for enabling and accelerating the Company's profitable, sustainable growth.

ESG

We take great pride in the fact that our solutions help customers reduce emissions, improve safety for their drivers, and ensure their vehicles are driven and maintained effectively - lengthening the useful life of their assets. Together, these benefits reduce costs to our customers but they also improve the environment for everybody, both in terms of lowering pollutants in the atmosphere and also in making our roads a safer place.

Microlise is committed to meeting its net zero goals and continues to improve its ESG credentials. As such, the Company has now introduced an ESG element to its executive team's incentive plan, ensuring all management are aligned and encouraged in meeting Microlise's sustainability objectives.

During the first half of the year, we also completed the installation of 502 solar panels at our Nottingham HQ, with the objective of reducing the site's annual carbon footprint by over 80 tonnes of CO2.

Everybody at Microlise has worked hard toward making the Company's net zero goals a reality during 2023. This work will remain at the forefront of our efforts during 2024 and we look forward to updating the market on our continued progress going forward.

In terms of the social element of ESG, we achieved 'Great Place to Work' and 'Great Place to Work for Women' accreditations in April 2023, when we were officially ranked 29th among large organisations for the best wellbeing category.

We were also quoted as one of the Top 100 places to work in the UK for recognising our commitment to improving the work experience of our employees and their wellbeing.

Outlook

Microlise delivered a strong performance in FY23 exceeding our expectations, despite supply chain issues remaining in the first half of the year and their residual effects on new vehicle availability persisting into the second half. We are now confident that these issues are fully behind us, and we have emerged a stronger and more resilient business as a result.

We experienced record sales into OEMs in FY23 and direct business sales have grown strongly since the latter part of the year as new vehicle availability began to improve. These are trends we expect to continue in FY24, both in the UK and internationally.

This growth will be complemented by the additional capabilities provided by our recent acquisitions; the greater compatibility of our solutions with third-party products; and the increasingly interoperable nature of our product suite. This growth is also expected to flow through into profitability and enhance the earnings of the Company going forward.

Nadeem Raza, Chief Executive Officer

CFO Statement

The financial results for the twelve-month period to 31 December 2023 reflect another period of profitable growth for Microlise.

Key Performance Indicators

The following key performance indicators for the 12-month period to 31 December 2023 include a comparison to the audited statutory results for the 12-months to 31 December 2022.

Group Results

Revenue

Total Revenue for the 12 months ended 31 December 2023 (FY23) was £71.7m, an increase of 13% from 31 December 2022 (FY22) as a result of both record levels of OEM⁽¹⁾ sales and increased revenue from direct customers. The Group delivered an increased win rate in the year, with over 450 new direct customers (2022: 250) which led to strong revenue growth towards the end of the year as an improvement of new vehicle availability in H2 enabled delivery against many of these new customers.

Strong customer wins, record OEM sales, together with growth in our existing customer's fleets resulted in recurring SaaS revenues growing to £45m, an increase of 11% compared to £40.5m in FY22 and 12% growth in ARR, of which 11.8% represented organic growth, to £47.7m as at 31 December 2023 from £42.6m on 31 December 2022. Recurring revenues represented 63% of total revenue (FY22 64.1%).

Hardware revenue increased 10% to £19.9m (FY22: £18.0m) as a result of the continued strong demand from OEM customers as well as the ability to deliver direct customer orders as vehicle availability improved in H2. The strong demand from direct customers in H2 also drove a 46% increase in services revenue, which comprises of installation services, project management and integration services, to £6.8m (FY22: £4.7m).

In addition to winning new business and deepening existing accounts, the Group successfully maintained an extremely low rate of customer churn by value at 0.7% (FY22: 0.4%). This reflects the mission critical importance of Microlise's software solutions in our customers' operations.

Gross Profit

Gross profit for the 12 months ended 31 December 2023 increased by 16% to £43.6m (FY22 £37.6m). Gross margin % increased from 60% to 61% reflecting margin improvements in recurring and non-recurring revenue.  Non recurring margin increased by c.2.0% driven primarily by strong performance in H2 due to increased revenues from direct customers as vehicle availability improved. Recurring margin also saw a c.2.0% increase as a result of increased subscription revenues coupled with effective cost management and efficiency programmes.

Administrative Expenses

The Group has continued to invest in product and development, operations, and sales & marketing.

Administrative expenses before exceptional administrative charges, amortisation relating to acquisitions and share based payment charges, in the 12-month period ended 31 December 2023 increased 16% to £35.1m (FY22: £30.3m).

Staff costs in the 12 months ended 31 December 2023 increased 16% to £30m (FY22: £25.8m) reflecting our increase in headcount in line with our growth, the impact of the acquisitions of Vita Software and K-Safe, as well as annual pay awards and increased commissions/bonuses reflecting the increased new customer win rate and the Group's strong EBITDA performance. Average headcount in the Period was 715 (FY22: 661) overall, with 31 of the increase within operations, product and development reflecting our continued focus on the product roadmap, platform integration, enhanced user experience and enhanced security measures. A further 10 staff were added in sales & marketing including increases in staff numbers in Australia and France to drive growth in these regions. The increase in operations includes additional engineering resource to support the strategy of bringing more installation work in-house which supports our margin enhancement strategy.

Marketing costs increased during the period by £0.1m to £1.1m as the Group has continued to focus on growth with targeted marketing spend in key strategic geographies. This includes an increased number of exhibitions globally, the implementation of global prospecting tools and the product launch of Microlise TMS (Vita software).

Administration costs increased during the period by a net £0.1m as the Group continues to invest significantly in its internal business systems to drive efficiencies and improvements in its security posture, this increased level of spend is offset by reduced spend in other areas.

Capitalised development costs in the period were £2.5m (FY22: £1.8m), reflecting the ongoing levels of investment into the product portfolio, whilst amortisation of capitalised development costs in the period ended 31 December 2023 was £1.2m (FY22: £0.8m).

EBITDA⁽²⁾ & Profit Before Tax

The growth in revenue and gross margin has enabled the Group to deliver an adjusted EBITDA ahead of market expectations at £9.4m in the 12 months ended 31 December 2023, an increase of 15% (FY22: £8.2m).  Adjusted EBITDA margin increased to 13.1% (FY22: 13.0%) as a result of the Group's investment programme to improve its go-to-market and product offering and support further growth. To provide a better guide to the underlying business performance, adjusted EBITDA excludes exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of loss of associate, interest, tax and share based payments.

The adjusted profit before taxation excludes exceptional costs in relation to acquisitions and restructuring costs, amortisation charges of £2.2m as a result of business combinations (FY22: £2.1m), share of loss of associate and share based payments. Adjusted profit before taxation for the 12 months ended 31 December 2023 increased 17% to £5.6m (FY22: £4.8m). Reported profit before taxation in the period increased 74% to £2.5m (FY22: £1.4m).

Exceptional Costs

During FY23 the Group incurred a number of one-off charges relating to acquisition fees and subsequent restructuring. These are disclosed separately in note 2 of the financial statements to provide a better guide to the underlying financial performance of the Group. The total of these charges in the period ended 31 December 2023 was £0.4m (FY22: £0.2m).

Taxation

The tax charge in the 12 months ended 31 December 2023 increased to £0.9m (FY22: £0.1m). The principal factor driving this increase is deferred tax charges that relate to the reassessment of the likelihood of future deductions from the exercise of share options. Underlying deferred tax charges relate to the utilisation of accelerated allowances together with losses brought forward to reduce UK corporation tax for the 12 months, offset by the deferred tax credit relating to the amortisation of intangible assets. Due to these factors the effective tax rate for the period of 37% (FY22: 6%) which is higher than the main rate of corporation tax of 25%. For future periods we expect the effective rate to align with more closely with the main corporation tax rate.

From 1 July 2020, Microlise has been classified as a large company for tax research and development purposes and benefits from the Research and Development Expenditure Credit scheme (RDEC) with any benefit being reflected as grant income within other operating income. In the period ended 31 December 2023 the pre tax value of the credit was £0.6m (FY22: £0.6m)

EPS and Dividend

The Group reported an increase in profit after taxation in the period of 17% to £1.6m (FY22: £1.4m). As a result, the reported basic earnings per share for the 12 month period ended 31 December 2023 was 1.359p (FY22: 1.167p) and diluted earnings per share was 1.358p for the 12 months period ended 31 December 2023 (FY22: 1.165). For further information on earnings per share, please refer to note 8 of the financial statements.

The Group is pleased to announce the introduction of its dividend policy and proposes a full year dividend of 1.72 pence per share that will be payable on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.

Group Statement of Financial Position

The Group had net assets of £75.7m at 31 December 2023 (FY22: £73.5m). Intangible assets increased by £1.2m reflecting the £2.4m of acquired intangible assets and goodwill resulting from the acquisition of Vita Software Limited, capitalised development costs less amortisation charges. Current assets increased by £4.2m, primarily due to an increase in debtors driven by higher revenues in the year combined with the timing of several large receipts which have been received in full post period end. Total liabilities increased by £2.9m due to an increase in deferred income and trade payables. The Group typically invoices for software subscriptions monthly, quarterly, annually or for the life of the subscription in advance which drives a strong balance sheet with significant cash balances. Revenue is recognised in the month the service is provided with deferred income disclosed as contract liabilities in current and non current liabilities. As at the end of December 2023 total Trade and other payables was £48.3m (FY22: £46.1m) of this balance £34.5m (FY22: £33.3m) is deferred income and relates to future contracted revenue recognition.

Adjusted Cashflow⁽³⁾ & Net Cash

The Group ended the 12-month period to 31 December 2023 with cash and cash equivalents of £16.8m, a small increase on FY22 (FY22: £16.7m). This was partly due to the timing of several large receipts totalling £1.2m, which have been received in full post period end. Adjusted cash flows generated from operations ⁽⁵⁾ remains healthy at £9.3m in the period (FY22: £9.9m), this represents a cash conversion rate⁽⁴⁾ of 98% (FY22: 121%). Reported cash flows generated from operations in the period was £8.8m (FY22: £9.7m)

During the period, the Group increased investment into product and development as well as plant, property and equipment, particularly IT infrastructure to support ongoing advancements in both customer and internal business systems as well as security.

Banking Facility

The Group has renewed its facility with HSBC with an agreed £10.0m committed revolving cash flow facility and a £20m accordion. The Group has not utilised any of this facility to date. The Group's gross cash of £16.8m (FY22: £16.7m) and the undrawn £10.0m facility gives the Group £26.8m of cash, which the Directors believe provides ample headroom for Microlise to deliver against its strategic goals. Given the level of headroom in the business forecasts the board consider it appropriate to prepare the financial statements on the going concern basis.  Details of the board's going concern assessment is provided in the basis of preparation note in the financial statements on page 98.

Additional Notes

1.        OEM is an abbreviation for Original Equipment Manufacturers

2.        Adjusted EBITDA excludes, exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of profit or loss of associate, interest, tax and share based payments.

3.        Adjusted cash flow generated from operations adds back exceptional costs in relation to acquisitions and restructuring costs   

4.        Cash conversion is calculated by dividing adjusted cash flow generated from operations by adjusted EBITDA.

Nick Wightman, Chief Financial Officer

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2023

Consolidated Statement of Financial Position

as at 31 December 2023

Group Chief Financial Officer

Microlise Group plc         Registered number 11553192

Consolidated Statement of Changes in Equity

Company Statement of Financial Position

as at 31 December 2023

The Company has elected to take the exemption under section 408 of the Companies Act not to present the parent Company profit and loss account. The profit for the parent Company for the year was £5,529,000 (2022: loss of £182,000).

Group Chief Financial Officer

Microlise Group plc         Registered number 11553192

Company Statement of Changes in Equity

Consolidated Statement of Cash Flows

for the year ended 31 December 2023

The notes on pages X to X form part of these financial statements.

Notes to the cash flow statements

A. Cash generated from operations

The reconciliation of profit for the period to cash generated from operations is set out below:

B. Analysis of net funds

Major non cash items

£862,000 of additions to right of use assets and lease liabilities are included in non cash movements in the year ended 31 December 2023 (2022: £951,000).