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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Mind Gym Plc | LSE:MIND | London | Ordinary Share | GB00BF3SQB83 | ORD 0.001P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 40.00 | 38.00 | 42.00 | 40.00 | 40.00 | 40.00 | 1,240 | 08:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Schools & Education Svcs,nec | 55.01M | 2.94M | 0.0293 | 13.65 | 40.08M |
TIDMMIND
RNS Number : 3673V
Mind Gym PLC
01 December 2023
1 December 2023
Mind Gym PLC
("Mind Gym", the "Group" or the "Company")
Half year results for the six months ended 30 September 2023
Strong pipeline following a challenging first half
MindGym (AIM: MIND), the global provider of human capital and business improvement solutions, announces its half year results for the six months ended 30 September 2023.
6 months 6 months to 12 months to to 31 Mar 2023 30 Sept 30 Sept 2022 (FY23) 2023 (H1 FY24) (H1 FY23) Revenue GBP20.9m GBP26.8m GBP55.0m ------------- ---------------- ------------ US Revenue GBP11.1m GBP16.7m GBP31.3m ------------- ---------------- ------------ EMEA Revenue GBP9.8m GBP10.1m GBP23.7m ------------- ---------------- ------------ Gross profit margin 85.4% 87.5% 88.4% ------------- ---------------- ------------ Digitally enabled revenue mix 69% 71% 68% ------------- ---------------- ------------ Adjusted EBITDA(1) (GBP4.1m) GBP1.9m GBP5.3m ------------- ---------------- ------------ Statutory profit/(loss) (GBP13.2m) GBP0.6m GBP3m before tax ------------- ---------------- ------------ Diluted EPS (11.34p) 0.84p 2.84p ------------- ---------------- ------------ Cash at bank GBP2.1m GBP4.5m GBP7.6m ------------- ---------------- ------------ Capital expenditure GBP3.0m GBP2.2m GBP5.1m ------------- ---------------- ------------
(1) Adjusted EBITDA represents the underlying level of profit/ (loss), excluding exceptional items. In H1 FY24, exceptional items totalled GBP7.7m (H1 FY23: GBPnil), comprised of: digital asset impairment GBP6.6m, US office lease impairment GBP0.5m and restructuring costs GBP0.6m.
Financial Highlights
-- H1 FY24 revenue of GBP20.9m (H1 FY23: GBP26.8m) impacted by economic headwinds, resulting in delays and cancellations in Q2, which have affected the whole industry, particularly in the US
o In the US, revenue declined by 33% to GBP11.1m (H1 FY23: GBP16.7m), impacted by general market weakness, notably in the technology sector
o In EMEA, performance was resilient with revenues of GBP9.8m (H1 FY23: GBP10.1m). GBP2.0m of expected revenue moved into H2 FY24, resulting from a delay to the start of our large energy framework, which launched successfully in September
-- Digitally enabled revenue, as a proportion of total revenue in the period, was broadly flat at 69% (H1 FY23: 71%) reflecting a small increase in the proportion of face-to-face delivery
-- Completed an annualised GBP8.0m cost reduction exercise, of which GBP3.0m will impact FY24:
o Opex reduced by an annualised GBP4.5m, generating savings from H2 FY24 onwards and leading to a GBP1.1m exceptional restructuring charge
o Capex reduced by an annualised GBP3.5m to an anticipated GBP2.5m in FY25. This focuses investment on digital assets which are already revenue generating, with other activities paused. This resulted in a one-off, non-cash, impairment charge of GBP6.6m
-- The Group has adequate liquidity, with cash at 30 September 2023 of GBP2.1m (31 March 2023: GBP7.6m) and immediate access to GBP2.0m of its undrawn GBP10.0m debt facility, which it does not expect to utilise
Operational Highlights and Board Changes:
-- Following consultation with major shareholders, the Board has separately announced changes which reflect the planned evolution to the next stage of MindGym's growth and transition away from a founder dependent business:
o Christoffer Ellehuus to join MindGym as CEO designate on 8(th) January 2024 with the intention to join the Board and transition to CEO by the time of the FY24 AGM
o Octavius Black will move to Executive Chairman as part of a broader Board restructure to retain strong corporate governance and support delivery of MindGym's strategy
-- MindGym continues to bring innovative products to market:
o Awarded the prestigious Brandon Hall award for work with Burberry using Performa
o The recently acquired organisational diagnostics platform is now in trial with two clients
o Three awards won with the Association of Business Psychologists for our three year, multi million GBP work with Citi, utilising our new 'habit-lab' approach to culture change
o Launched the Point of View: 'Wellworking: how we can all be better at work', with a foreword by Amy Edmondson, Professor of Leadership at Harvard Business School. This has already been instrumental in securing a new contract with an estimated value of c. GBP0.8m
Current Trading & Outlook
-- The Company is trading in line with the Board's recently revised expectations for the full year
-- H2 FY24 will see a significant benefit from the Energy framework, which was successfully launched in September 2023, and continues through FY25
-- Six-month forward bookings at the start of H2 FY24 are higher than the same position twelve months ago.
-- There has been substantial growth in the pipeline in both regions, including a number of multi-year and multi-million pound frameworks
-- The level of the pipeline benefit on H2 FY24 is dependent on the speed of decision making and the rate at which clients mobilise. We note that:
o Since the start of October, there have been several notable project wins in EMEA
o Conversion of opportunities in the US remains slow
-- Combined with the impact of the revised cost base, this will enable a return to strong profitability in H2 FY24
-- The Group continues to target a medium-term EBITDA margin of 15% to 20%.
Analyst and Investor Webcast
The Company will host a webcast and conference call for analysts and investors at 9:00am BST today. Please contact mindgym@mhpgroup.com for further information.
Octavius Black, Chief Executive Officer of Mind Gym, said:
"We have had a challenging first half of FY24, with tough market pressures brought on by significant client restructures, especially in the US technology sector. These have led to programme delays and cancellations. We have responded by rapidly realigning the cost base and focusing capital expenditure on digital assets which are already revenue generating.
"Moreover, recent wins and strong pipeline growth with several significant GBP1m+ opportunities in healthcare, industrial and financial services, means we are confident of a significant improvement in financial performance in the second half of FY24.
"We have the right strategy, based on providing integrated solutions that deliver impact at scale. The opportunity for MindGym in this large and disaggregated market, remains strong."
Enquiries:
Mind Gym plc Octavius Black, Chief Executive Officer Dominic Neary, Chief Financial Officer +44 (0)20 7376 0626 Liberum (Nominated Adviser and Sole Broker) Nick How Edward Mansfield +44 (0)20 3100 2000 ----------------------- MHP (for media enquiries) +44 (0)20 3128 8100 Reg Hoare mindgym@mhpgroup.com Katie Hunt Veronica Farah -----------------------
About MindGym
MindGym is a company that delivers business improvement solutions using scalable, proprietary products which are based on behavioural science. The Group operates in three global markets: business transformation, human capital management and learning & development. Mind Gym is quoted on the London Stock Exchange Alternative Investment Market (ticker: MIND) and headquartered in London. The business has offices in London, New York and Singapore. Further information is available at www.themindgym.com
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
Operational Review
While trading conditions during H1 FY24 have been challenging, the Company is well-positioned for future success. Businesses continue to operate in a tight labour market with a shortage of skills driving a commercial necessity to invest to attract, retain and develop talent. There is no scale player in the highly fragmented $370bn Learning & Development market and MindGym offers a standout proposition in culture, leadership and productivity with 23 years of proprietary IP, clients who include most of FTSE-100 and S&P-100, and an omnichannel solution that integrates live, virtual and digital, fuelled by data.
Board changes:
As announced separately today, Christoffer Ellehuus will join MindGym as CEO designate on 8(th) January 2024, transitioning to CEO by the time of the AGM in July 2024 when Octavius Black will transition to Executive Chair and Ruby McGregor-Smith's three year term as Chair ends. In conjunction, a broader Board restructure will be undertaken to retain strong corporate governance, providing the right balance of skills, experience and independence and supporting delivery of MindGym's strategy.
Improvement in pipeline and conversion:
Despite the challenging conditions experienced during H1 FY24 there has been strong pipeline growth in both regions since the end of the period, including an increasing number of opportunities of GBP1m-GBP10m in value. Whilst conversion of opportunities in the US remains slow, there have been several notable project wins recently in EMEA, which will primarily benefit FY25, with FY24 impact dependent upon final agreed project phasing.
Developing market leading products
MindGym continues to bring innovative products to market, which are meeting with client approval:
-- In H1 FY24 we have seen a 31% uplift in the number of users utilising our Performa product. We were recently awarded the prestigious Brandon Hall award for our work with Burberry who used Performa as an integrated part of their MindGym leadership programme;
-- The Company's proprietary organisational diagnostics delivered on our new platform is now in trial with two clients and receiving positive feedback; and
-- We have had success with our new 'habit lab' approach to culture change, working with Citi on a multi-million, 3-year programme, which recently won three awards at the prestigious Association of Business Psychologist's awards. Several other clients are in conversations with the Company about adopting 'habit labs' for their culture change initiatives.
New wellness market opportunity
The global market for corporate wellbeing is estimated at GBP50bn and forecast to grow to GBP70bn [1] by 2030.
MindGym has launched a new point of view in a research paper 'Wellworking: how we can all be better at work' with a foreword by Amy Edmondson, Professor of Leadership at Harvard Business School. This has already been instrumental in securing one new contract with an estimated value of almost GBP1m and the Board expects this to be a driver of future growth.
Outlook
The Company is trading in line with the Board's recently revised expectations for the full year. We started H2 FY24 with higher forward bookings than at the same point in the prior year. We have also seen substantial growth in the pipeline in both regions, including a number of multi-year, multi-million pound frameworks, which will impact both FY25 and H2 FY24. The level of pipeline impact on H2 FY24 will depend on the speed of decision making and the rate at which clients mobilise once decisions are taken.
Whilst US conversion of opportunities remains subdued, several recent wins in EMEA, together with the ramp up of activity under our major energy framework provide increased confidence that we will see a step change in revenues vs. H1 FY24. This, coupled with the impact of the revised cost based will enable a return to strong profitability in H2 FY24, and into FY25. The Group continues to target a medium term EBITDA margin of 15% to 20%.
Financial Review:
Revenue and Gross Margin
Revenue in H1 FY24 was GBP20.9m, a reduction of 22% on the equivalent period in the prior year (H1 FY23: GBP26.8m), impacted by economic headwinds. In Q2, these trading conditions resulted in several clients and prospective clients undergoing major restructuring programmes and showing caution in committing to new spend. This both pushed out the timeframe for the delivery of existing programmes and resulted in delays to the procurement of new projects.
The effects of this were more pronounced in the US, where MindGym's client base, especially in the technology sector, were particularly affected. As a result, revenue in the Americas declined by 33% to GBP11.1m (H1 FY23: GBP16.7m).
In EMEA, performance was more resilient, where revenue declined 3% vs. prior year to GBP9.8m (H1 FY23: GBP10.1m). GBP2m of expected revenue slipped into H2 FY24, resulting from a delay to the start of our large energy framework, which launched successfully in September.
Digitally enabled revenue in the period was broadly flat at as a proportion of total revenue at 69% (H1 FY23: 71%) reflecting a small increase in the proportion of face-to-face delivery.
Revenue from the Group's top 25 clients increased slightly to 48% (H1 FY23: 40%) in line with the trend towards a greater proportion of opportunities of scale.
Gross margin declined slightly to 85.4% (H1 FY23: 87.5%), reflecting the change in revenue mix from Design and Advisory to Delivery in the period.
Administrative Expenses
In response to the reduction in revenue, management reacted during the period to realign the cost base and preserve cash. Since the start of FY24, annualised cost reductions of GBP8.0m have been implemented (GBP4.5m in operating expenditure and GBP3.5m in capital expenditure). The benefit of these savings will have an impact of c.GBP3m on H2 FY24, with the full year benefit in FY25.
These actions resulted in an exceptional charge during the period of GBP7.7m comprising:
-- Digital asset impairment GBP6.6m: This is outlined in the Digital Asset Impairment section below;
-- Impairment of lease on US office GBP0.5m: With a greater proportion of the team working remotely, the decision was taken during the period to vacate a proportion of the office. Directors are exploring opportunities to sub-let this space, however, with no certainty over any recovery from such sub-letting and with a proportion of the office not now being utilised, an impairment charge in respect of that proportion of the lease has been applied in the period. The pre-COVID GBP0.8m annual cost of this office will end in February 2025, and be replaced by a significantly cheaper alternative; and
-- Restructuring costs GBP0.6m: Reflecting headcount reductions.
Net of these exceptional items and depreciation and amortisation of GBP1.4m (H1 FY23: GBP1.3m), underlying administrative expenses of GBP22.0m, represented a below inflation increase of 2% on the prior period (H1 FY23: GBP21.5m).
Excluding the exceptional restructuring cost of GBP0.6m, employee costs rose 2% to GBP17.6m in the period (H1 FY23: GBP17.2m). This reflected average employee numbers of 358, an increase of 10% on the equivalent period in the prior year, following an increase in employee numbers during FY23. The period end employee number of 349, however, represented a 6% reduction on the start of the period. Including further savings implemented since the end of the period, the total annualised value of operating cost savings delivered since the start of FY24 is GBP4.5m.
Digital Asset Impairment
In response to the downturn in Q2 revenue, with the corresponding impact that this has had on the cash position, the directors reviewed the ongoing investment being made across several digital products in development. Following this revsview, the decision has been taken to pause ongoing funding on longer-term opportunities that are not currently revenue generating, primarily relating to the Digital Experience user journey (DXP) and the platform which supports this. This decision will result in an annualised cash reduction of GBP3.5m in capital expenditure.
A significant proportion of the features and underlying technology built in the development of these assets will be utilised in the integrated products and solutions MindGym continues to deliver to clients. However, since it is now uncertain whether this technology will not now 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 has resulted in a one-off impairment charge of GBP6.6m in the period.
Profit/ (loss)
The adjusted EBITDA loss for the period (excluding the impact of the exceptional items) was GBP4.1m (H1 FY23: GBP1.9m profit). The adjusted profit/ (loss) before tax was a loss of GBP5.5m (H1 FY23: GBP0.6m profit). Including the exceptional adjusting items, the loss before tax for the period was GBP13.2m (H1 FY23: GBP0.6m profit).
On an adjusted basis, basic earnings per share for the period were -5.61p (loss) (H1 FY23: 0.83p) and diluted earnings per share were -5.61p (loss) (H1 FY23: 0.84p). On an unadjusted basis earnings per share for the period were -11.34p (loss) (H1 FY23: 0.83p) and diluted earnings per share were -11.34p (loss) (H1 FY23: 0.84p).
Cash
Despite the loss in the period, the Group has adequate cash liquidity. Cash at bank at 30 September 2023 was GBP2.1m, a reduction of GBP5.5m from the year-end balance at 31 March 2023 of GBP7.6m. Further to this, MindGym retains immediate access to GBP2.0m of its undrawn GBP10.0m debt facility.
MIND GYM PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months to to Year to 30 Sept 30 Sept 31 March 2023 2022 2023 (Unaudited) (Unaudited) (Audited) Note GBP'000 GBP'000 GBP'000 Revenue 3 20,905 26,759 55,011 Cost of sales (3,051) (3,344) (6,360) -------------- -------------- ------------ Gross profit 17,854 23,415 48,651 Administrative expenses (30,978) (22,749) (45,568) -------------- -------------- ------------ Operating profit/(loss) (13,124) 666 3,083 Finance income 5 30 27 55 Finance costs 5 (78) (52) (174) -------------- -------------- ------------ (Loss)/profit before taxation (13,172) 641 2,964 Adjusted (loss)/profit before tax (5,497) 641 2,964 Adjusting items 6 (7,675) - - -------------- -------------- ------------ (Loss)/profit before tax (13,172) 641 2,964 ---------------------------------------------- ------ -------------- -------------- ------------ Tax on (loss)/profit 7 1,808 207 (29) -------------- -------------- ------------ (Loss)/profit for the financial period from continuing operations attributable to owners of the parent (11,364) 848 2,935 ============== ============== ============ Items that may be reclassified subsequently to profit or loss Exchange translation differences on consolidation 20 785 297 -------------- -------------- ------------ Other comprehensive income for the period attributable to the owners of the parent 20 785 297 -------------- -------------- ------------ Total comprehensive income for the period attributable to the owners of the parent (11,344) 1,633 3,232 ============== ============== ============ (Loss)/earnings per share (pence) Basic 8 (11.34p) 0.83p 2.93p Diluted 8 (11.34p) 0.84p 2.84p -------------- -------------- ------------ Adjusted (loss)/earnings per share (pence) Basic 8 (5.61p) 0.83p 2.93p Diluted 8 (5.61p) 0.84p 2.84p --------- ------- -------
MIND GYM PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 30 September 30 September March 2023 2022 2023 (Unaudited) (Unaudited) (Audited) Note GBP'000 GBP'000 GBP'000 Non-current assets Intangible assets 10 7,904 9,787 12,320 Property, plant and equipment 11 2,697 4,584 3,691 Deferred tax assets 2,783 3,084 3,229 Other receivables 233 257 230 -------------- -------------- ----------- 13,617 17,712 19,470 Current assets Inventories 42 35 53 Trade and other receivables 12 7,258 13,553 9,527 Current tax receivable 1,193 594 779 Cash and cash equivalents 2,069 4,507 7,587 -------------- -------------- ----------- 10,562 18,689 17,946 -------------- -------------- ----------- Total assets 24,179 36,401 37,416 ============== ============== =========== Current liabilities Trade and other payables 13 10,010 11,123 11,423 Lease liability 1,118 1,151 1,121 Redeemable preference shares 50 50 50 Current tax payable - - 20 -------------- -------------- ----------- 11,178 12,324 12,614 Non-current liabilities Lease liability 1,529 2,761 1,988 Total liabilities 12,707 15,085 14,602 -------------- -------------- ----------- Net assets 11,472 21,316 22,814 ============== ============== =========== Equity Share capital 15 1 1 1 Share premium 258 242 242 Share option reserve 474 597 496 Retained earnings 10,739 20,476 22,075 -------------- -------------- ----------- Equity attributable to owners of the parent Company 11,472 21,316 22,814 ============== ============== ===========
The Board of Directors approved these condensed interim financial statements on 30 November 2023.
MIND GYM PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Share option Retained capital premium reserve earnings Total equity Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2022 1 213 608 18,804 19,626 ========== ========== ========== =========== ============== Profit for the period - - - 848 848 Other comprehensive income: Exchange translation differences on consolidation - - - 785 785 ---------- ---------- ---------- ----------- -------------- Total comprehensive income for the period - - - 1,633 1,633 Exercise of options - 29 (39) 39 29 Credit to equity for share based payments 16 - - 28 - 28 At 30 September 2022 1 242 597 20,476 21,316 ========== ========== ========== =========== ============== Profit for the period - - - 2,087 2,087 Other comprehensive income: Exchange translation differences
on consolidation - - - (488) (488) ---------- ---------- ---------- ----------- -------------- Total comprehensive income for the period - - - 1,599 1,599 Debit to equity for share based payments 16 - - (101) - (101) At 31 March 2023 1 242 496 22,075 22,814 ========== ========== ========== =========== ============== (Loss) for the period - - - (11,364) (11,364) Other comprehensive income: Exchange translation differences on consolidation - - - 20 20 ---------- ---------- ---------- ----------- -------------- Total comprehensive income for the period (11,344) (11,344) Exercise of options - 16 (8) 8 16 Credit to equity for share based payments 16 - - (14) - (14) At 30 September 2023 1 258 474 10,739 11,472 ========== ========== ========== =========== ==============
MIND GYM PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months to to Year to 30 Sept 30 Sept 31 March 2023 2022 2023 (Unaudited) (Unaudited) (Audited) Note GBP'000 GBP'000 GBP'000 Cash flows from operating activities (Loss)/profit for the financial period (11,364) 848 2,935 Adjustments for: Amortisation of intangible assets 10 740 508 743 Impairment of intangible assets 10 6,604 - - Depreciation of tangible assets 11 610 713 1,468 Impairment of right of use asset 11 516 - - Net finance costs 5 48 25 119 Taxation (credit)/charge 7 (1,808) (207) 29 (Increase)/decrease in inventories 11 (28) (46) Decrease/(increase) in trade and other receivables 12 2,266 (3,489) 524 Increase/(decrease) in payables and provisions 13 (1,413) (1,606) (1,306) Share based payment charge 16 (14) 28 (73) ------------ Cash (utilised)/generated from operations (3,804) (3,208) 4,393 Net tax (paid) 1,864 (128) (766) --------------- --------------- Net cash generated from operating activities (1,940) (3,336) 3,627 --------------- --------------- ------------ Cash flows from investing activities Purchase of intangible assets 10 (2,928) (2,120) (4,888) Purchase of property, plant and equipment (55) (91) (240) Interest received 30 26 54 --------------- --------------- ------------ Net cash used in investing activities (2,953) (2,185) (5,074) --------------- --------------- ------------ Cash flows from financing activities Cash repayment of lease liabilities (610) (683) (1,298) Issuance of ordinary shares 16 29 29 Interest paid (15) - (52) Net cash used in financing activities (609) (654) (1,321) --------------- --------------- ------------ Net (decrease) in cash and cash equivalents (5,502) (6,175) (2,768) Cash and cash equivalents at beginning of period 7,587 10,021 10,021 Effect of foreign exchange rate changes (16) 661 334 --------------- --------------- ------------ Cash and cash equivalents at the end of period 2,069 4,507 7,587 =============== =============== ============ Cash and cash equivalents at the end of period comprise: Cash at bank and in hand 2,069 4,507 7,587 =============== =============== ============
MIND GYM PLC
NOTES TO THE GROUP FINANCIAL STATEMENTS
1. General information
Mind Gym plc ("the Company") is a public limited company incorporated in England & 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 Mind Gym plc and its subsidiaries, Mind Gym (USA) Inc., Mind Gym Performance (Asia) Pte. Ltd and Mind Gym (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, and related services.
2. Basis of preparation
The condensed interim financial statements have been prepared in accordance with the requirements of the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2023, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, including interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"), and with the Companies Act 2006 applicable to companies reporting under IFRS. The unaudited interim financial information does not constitute statutory accounts within the meaning of the Companies Act 2006. This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the Board of directors on 30 November 2023.
Statutory accounts for the year ended 31 March 2023 were approved by the Board of Directors on 12 June 2023 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
The interim financial statements have been prepared on a going concern basis under the historical cost convention.
The interim financial statements are presented in pounds sterling. All values are rounded to GBP1,000 except where otherwise indicated.
The accounting policies used in preparing the interim results are the same as those applied to the latest audited annual financial statements.
The Group has chosen to present an adjusted measure of profit and earnings per share, which excludes certain items which are separately disclosed due to their size, nature or incidence, and are not considered to be part of normal operating costs of the Group. These costs include restructuring costs and impairment charges.
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 6 months ended 30 September 2023 (Unaudited)
Segment result
EMEA America Total GBP'000 GBP'000 GBP'000 Revenue 9,807 11,098 20,905 Cost of sales (1,508) (1,543) (3,051) Administrative expenses (19,999) (10,979) (30,978) ---------- ---------- ---------- Profit before inter-segment charges (11,700) (1,424) (13,124) Inter-segment charges (295) 295 - ---------- ---------- ---------- Operating profit - segment result (11,995) (1,129) (13,124) Finance income 30 Finance costs (78) ---------- (Loss) before tax (13,172) ========== Adjusted (loss) before tax EMEA America Total GBP'000 GBP'000 GBP'000 Operating (loss) - segment result (11,995) (1,129) (13,124) Adjusting items 6,714 961 7,675 Adjusted EBIT (5,281) (168) (5,449) Finance income 30 Finance costs (78) ---------- Profit before tax (5,497) ==========
The mix of revenue for the six months ended 30 September 2023 is set out below.
EMEA America Group Delivery 69.4% 75.0% 72.3% ---------- ------------ ---------- Design 15.0% 9.2% 11.7% ---------- ------------ ---------- Digital 10.2% 8.7% 9.7% ---------- ------------ ---------- Licensing and certification 2.5% 2.6% 3.3% ---------- ------------ ---------- Other 1.8% 4.0% 2.2% ---------- ------------ ---------- Advisory 1.1% 0.5% 0.8% ---------- ------------ ----------
Segment results for the 6 months ended 30 September 2022 (Unaudited)
Segment result
EMEA America Total GBP'000 GBP'000 GBP'000 Revenue 10,078 16,681 26,759 Cost of sales (1,285) (2,059) (3,344) Administrative expenses (11,639) (11,110) (22,749) ---------- ---------- ---------- Profit before inter-segment charges (2,846) 3,512 666 Inter-segment charges 3,260 (3,260) - ---------- ---------- ---------- Operating profit - segment result 414 252 666 Finance income 27 Finance costs (52) ---------- Profit before tax 641 ==========
The mix of revenue for the six months ended 30 September 2022 is set out below.
EMEA America Group Delivery 67.1% 64.7% 65.6% ---------- ------------ ---------- Design 13.2% 14.8% 14.1% ---------- ------------ ---------- Digital 11.6% 10.0% 10.7% ---------- ------------ ---------- Licensing and certification 4.5% 6.7% 5.8% ---------- ------------ ---------- Other 2.1% 2.4% 2.3% ---------- ------------ ---------- Advisory 1.5% 1.4% 1.5% ---------- ------------ ----------
Segment results for the year ended 31 March 2023 (Audited)
Segment result
EMEA America Total GBP'000 GBP'000 GBP'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 (loss)/profit - segment result 2,977 106 3,083 Finance income 55 Finance costs (174) ---------- Loss before tax 2,964 ==========
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% ---------- ------------ ---------- 4. Employees
Staff costs were as follows:
6 months to 6 months to Year to 31 30 Sept 2023 30 Sept 2022 March 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Wages and salaries 16,093 15,194 31,036 Social security costs 1,481 1,395 2,944 Pension costs - defined contribution plans 584 550 1,055 Share-based payments (14) 28 (73) 18,144 17,167 34,962 =============== =============== =============
The average number of Group's employees by function was:
6 months to 6 months to Year to 31 30 Sept 2023 30 Sept 2022 March 2023 (Unaudited) (Unaudited) (Audited) Delivery 226 208 218 Support 81 77 79 Digital 51 39 44 358 324 341 =============== =============== =============
The period end number of Group's employees by function was:
6 months to 6 months to Year to 31 30 Sept 2023 30 Sept 2022 March 2023 (Unaudited) (Unaudited) (Audited) Delivery 216 212 241 Support 81 77 86 Digital 52 43 46 349 332 373 =============== =============== ============= 5. Net finance costs 6 months to 6 months to Year to 31 30 Sept 2023 30 Sept 2022 March 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Finance income Bank interest receivable 30 26 54 Finance lease income - 1 1 Finance costs Bank interest payable (15) - (52)
Lease interest (IFRS 16) (63) (52) (122) (48) (25) (119) =============== =============== ============= 6. Adjusting items 6 months to 6 months to Year to 31 30 Sept 2023 30 Sept 2022 March 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Restructuring costs 555 - - Impairment of intangibles 6,604 - - Impairment of right of use asset 516 - - 7,675 - - =============== =============== =============
Restructuring costs in the six months ended 30 September 2023 include redundancy 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.
7. Tax
The statutory tax credit of GBP1,808,000 (six months ended 30 September 2022: credit of GBP207,000); year ended 31 March 2023: charge of GBP29,000) represents an effective tax rate on loss before tax of 13.7% (six months ended 30 September 2022: -32%; year ended 31 March 2023: 1%).
During the period, The Company resubmitted the UK tax returns for the years ended 31 March 2022 and 31 March 2023, in order to surrender the Research and Development tax credit for a cash refund. This resulted in a current tax prior year adjustment of GBP1.9m and corresponding deferred tax prior year adjustment of GBP3.3m.
8. Earnings per share
Basic earnings per share 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 16).
30 Sept 2023 30 Sept 2022 31 March 2023 (Unaudited) (Unaudited) (Audited) Weighted average number of shares in issue 100,174,502 100,119,558 100,143,571 Potentially dilutive shares (weighted average) 4,324,325 1,059,821 3,141,506 -------------- -------------- --------------- Fully diluted number of shares (weighted average) 104,498,827 101,179,379 103,285,077 -------------- -------------- --------------- 6 months to 6 months to Year to 31 30 Sept 2023 30 Sept 2022 March 2023 (Unaudited) (Unaudited) (Audited) pence pence pence Basic earnings per share (11.34) 0.85 2.93 Diluted earnings per share (11.34) 0.84 2.84 Adjusted basic earnings per share (5.61) 0.85 2.93 Adjusted diluted earnings per share (5.61) 0.84 2.84 9. Dividends
The Board did not propose a final dividend for the year ended 31 March 2023. No interim dividend is proposed for the period to 30 September 2023.
10. Intangible assets
Development Patents costs Total GBP'000 GBP'000 GBP'000 Cost At 1 April 2023 121 15,173 15,294 Additions 16 2,912 2,928 At 30 September 2023 137 18,085 18,222 Amortisation At 1 April 2023 66 2,908 2,974 Amortisation charge 3 737 740 Impairment - 6,604 6,604 --------- ------------- --------- At 30 September 2023 69 10,249 10,318 ========= ============= ========= Net book value At 31 March 2023 55 12,265 12,320 --------- ------------- --------- At 30 September 2023 68 7,836 7,904 ========= ============= =========
Development cost additions in the six months ended 30 September 2023 includes software development costs directly incurred in the creation of new digital assets. The Group undertook an impairment review and as a result reflected an impairment charge of GBP6,604k.
11. Property, plant and equipment
Right-of-use Leasehold Development asset improvements costs Total GBP'000 GBP'000 GBP'000 GBP'000 Cost At 1 April 2023 6,189 538 1,793 8,520 Additions 69 - 55 124 Exchange differences 50 5 16 71 -------------- --------------- ------------- --------- At 30 September 2023 6,308 543 1,864 8,715 Depreciation At 1 April 2023 3,235 374 1,220 4,829 Depreciation charge 404 41 168 613 Impairment 516 - - 516 Exchange differences 42 6 12 60 -------------- --------------- ------------- --------- At 30 September 2023 4,197 421 1,400 6,018 ============== =============== ============= ========= Net book value At 31 March 2023 2,954 164 573 3,691 -------------- --------------- ------------- --------- At 30 September 2023 2,111 122 464 2,697 ============== =============== ============= =========
12. Trade and other receivables
31 March 30 Sept 2023 30 Sept 2022 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Trade receivables 5,151 10,657 6,730 Less provision for impairment (94) (259) (102) -------------- -------------- ------------ Net trade receivables 5,057 10,398 6,628 Other receivables 65 202 80 Prepayments 794 1,074 1,125 Accrued income 1,342 1,879 1,694 7,258 13,553 9,527 ============== ============== ============
Non-current assets includes GBP233,000 (30 September 2022: GBP257,000; 31 March 2023: GBP230,000) of prepayments in respect of property deposits.
Trade receivables have been aged with respect to the payment terms as follows:
31 March 30 Sept 2023 30 Sept 2022 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Not past due 4,503 9,311 6,282 Past due 0-30 days 313 693 336 Past due 31-60 days 182 216 74 Past due 61-90 days 74 344 12 Past due more than 90 days 79 92 26 5,151 10,656 6,730 ============== ============== ============
13. Trade and other payables
31 March 30 Sept 2023 30 Sept 2022 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Trade payables 1,294 1,019 1,257 Other taxation and social security 2,023 829 744 Other payables 421 623 396 Accruals 3,406 4,248 4,606 Deferred income 2,866 4,404 4,420 10,010 11,123 11,423 ============== ============== ============
14. Borrowings
The Group entered into a GBP10 million debt facility (GBP6m RCF, GBP4m accordion) on 30 September 2021 which matures after 3 years. The facility remains undrawn as at 30 November 2023.
15. Share capital
30 Sept 30 Sept 30 Sept 30 Sept 31 March 31 March 2023 2023 2022 2022 2023 2023 Cost Cost Cost Number GBP'000 Number GBP'000 Number GBP'000 Ordinary shares of GBP0.00001 At 1 April 100,167,584 1 100,105,660 1 100,105,660 1 Issue of shares to satisfy options 30,880 - 61,924 - 61,924 - Ordinary shares of GBP0.00001 at period end 100,198,464 1 100,167,584 1 100,167,584 1 ============= ========= ============= ========= ============= ==========
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 awards granted in the six months to 30 September 2023 are subject to performance conditions based on revenues and EBITDA.
The awards granted in the six months to 30 September 2022 are subject to performance conditions based on revenues and EBITDA. Some awards granted during this time period are time bound only.
The awards granted during FY22 are subject to performance conditions based on revenue, adjusted earnings per share and total shareholder return.
On the 30(th) September 2019 the Group launched an annual Save As You Earn Scheme and an Employee Share Purchase Plan for all eligible employees in the UK and USA respectively.
The total share-based payments (credit)/expense was:
6 months 6 months Year to to 30 Sept to 30 Sept 31 March 2023 2022 2023 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 Equity settled share-based payments (14) 28 (73) ============== ============== ============
[1] Grandview Research 2021
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