REG - Made Tech Group PLC - Audited Final Results 2023
13/09/2023 07:15
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RNS Number : 2279M Made Tech Group PLC 13 September 2023
13 September 2023
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
MADE TECH GROUP PLC
("Made Tech" or the "Group")
AUDITED FINAL RESULTS 2023
Made Tech Group plc, a leading provider of digital, data and technology
services to the UK public sector, announces its audited final results for the
year to 31 May 2023 ("FY23" or the "period").
Financial summary
FY23 FY22 Change
Revenue £40.2m £29.3m £10.9m
Gross profit £14.4m £11.3m £3.1m
Gross profit margin 35.81% 38.43% (2.6pp)
Adjusted EBITDA(1) £1.5m £2.6m (£1.1m)
Adjusted EBITDA margin 3.79% 9.04% (5.25pp)
Adjusted profit before tax(2) £1.0m £2.3m (£1.3m)
Sales Bookings(3) £69.9m £51.1m £18.8m
Contracted Backlog(4) £67.9m £38.2m £29.7m
Cash £8.5m £12.3m (£3.8m)
● Revenue up 37% (organic) to £40.2m (FY22: £29.3m) and CAGR of over 80% over
the last 5 years
● Adjusted EBITDA at £1.5m (FY22: £2.6m) impacted by unexpected delays to
scheduled work streams towards year end
● Cash at 31 May 2023 at £8.5m (FY22: £12.3m), following a £3.1m strategic
investment in new SaaS products and expanding capabilities
● Contracted Backlog growth of 44% to £67.9m (FY22: £38.2M) and Sales Bookings
up 37% to £69.9m (FY22: £51.1m)
Operational highlights
● Trend of increased contract sizes continued during FY23, with two contracts
won over £10m, seven over £5m and 10 over £2m during FY23, reflecting the
Group's growing stature in the market
● First of three, higher margin, recurring revenue SaaS products successfully
launched in the year for local authority market, presenting a substantial
market opportunity to generate recurring revenues at higher margins
● Cost base right sized, reducing from 484 at the HY end to 430 at the FY end
(FY22: 478) and further reduction in contractors from 10% at HY end to 8% at
FY end (FY22: 35%)
● Utilisation at 70% (FY22: 81%) impacted by changes at a number of our client
organisations, which resulted in the rephasing of certain projects at short
notice.
● Carbon neutral status achieved during the year and clear ESG objectives set
● Leadership team strengthened with appointment of Tim Bardell as Chief Delivery
and Transformation Officer and Wayne Searle as Chief People Officer, as part
of preparations for the next wave of growth
Post year end highlights and outlook
● Revenue for FY24 expected to be in line with FY23, due to near term political
and macro environment challenges. Digital transformation market expected to
remain buoyant over the long term.
● Firm focus on profitability with the Group reporting an improved adjusted
EBITDA in the first three months of the new financial year and trading in line
with expectations for FY24
● One of only 11 suppliers to win a place on Lot 2b of the new Digital and
Legacy Application Services framework ("DALAS"), which is expecting to spend
£700m-800m until September 2027
● With a strong team, brand and market positioning, a reputation for excellent
digital delivery, a clear strategy and a robust financial position, the board
remains excited about the opportunities which lie ahead
Rory MacDonald, CEO, commented:
"This year marked our first full year on the public markets, a significant
milestone in our corporate journey. Despite the challenges of a turbulent
macroeconomic landscape, we have made significant strategic progress. We have
delivered another year of solid organic revenue growth, up 37% yearly. This
continues our impressive track record of organic growth, with a compound
organic annual growth rate ("CAGR") of c.80% over the last five years, a
market-leading figure within our sector.
We achieved a record level of sales bookings at £69.9m, driven by a
substantial number of contract renewals and expanding our remit with key
clients. This is a testament to the strength of our client relationships and
the quality of our services. In addition to expanding our service lines, we
have continued investing in intellectual property ("IP") solutions. This
financial year, we spent £1.5m on developing three new SaaS products,
specifically designed for the local government market. Our investment in IP
solutions is a key part of our longer-term strategy to provide a
comprehensive, end-to-end transformation offering which spans software and
services.
Our financial position remains strong, as we stay debt-free and had a cash
balance of £8.5m at the end of FY23. Our immediate focus is improving
profitability and operating cashflow, as we settle the business ahead of our
next wave of growth.
Thank you to our shareholders, employees, partners and clients for their
ongoing support, and we look forward to delivering value for you in the years
ahead."
Online investor presentation
As part of the Group's Results roadshow, the management team will also host an
online investor presentation with Q&A tomorrow, 14 September 2023, at
12.30pm. To participate, please register with PI World at:
https://bit.ly/MTEC_FY23_results_presentation
(https://bit.ly/MTEC_FY23_results_presentation) .
(1) Adjusted EBITDA means operating profit before depreciation, amortisation,
exceptional items
and share based payment charge
(2) Adjusted profit before tax means profit before tax before amortisation of
intangible assets, share based payment charge and exceptional items
(3) Sales bookings represent the total value of sales contracts awarded in the
year, to be delivered in FY22-FY25
(4) Contracted Backlog is the value of contracted revenue that has yet to be
recognised
Enquiries:
Made Tech via Belvedere PR
Rory MacDonald, CEO
Deborah Lovegrove, CFO
Singer Capital Markets (Nominated Adviser & Broker) Tel: +44 (0) 20 7496 3000
Jen Boorer/ Harry Gooden / Asha Chotai
Belvedere PR (Financial PR) Email: madetech@belvederepr.com (mailto:madetech@belvederepr.com)
Cat Valentine Tel: +44 (0) 7715 769078
Keeley Clarke Tel: +44 (0) 7967 816525
About Made Tech
Made Tech is a high-growth provider of digital, data and technology services
to the UK public sector. Founded in 2008 and with a headcount of over 430
across multiple UK locations, Made Tech provides services that enable central
government, healthcare and local government organisations to digitally
transform.
The Group's purpose is to "positively impact the future of society by
improving public sector technology". To achieve this the Group has four key
strategic missions: Modernise legacy technology and working practices;
Accelerate digital service and technology delivery; Drive better decisions
through data and automation; and Enable technology and delivery skills to
build better systems.
More information is available at www.madetech.com (http://www.madetech.com)
CHAIR'S REPORT
I am pleased to present Made Tech's audited annual results for the year ended
31 May 2023, another year of substantial revenue growth for the business,
which have been delivered despite the continuing challenging wider economic
circumstances.
With the post-Covid economic recovery being compromised by inflationary
pressures, including wage inflation, the continuing delivery of strong revenue
growth and increasing numbers of clients are achievements which are testament
to the talented teams we have throughout the business. I must also acknowledge
our disappointment when, in the final few weeks of the financial year,
unforeseen rephasing of the required work packages by certain of our clients
and the consequent lower level of associated revenues negatively impacted our
performance in FY23.
Summary of the year
With revenue for the year nevertheless increasing by a substantial 37% to
£40.2m (FY22 £29.3m), this continues an exceptionally strong track record of
growth, delivering an 83% CAGR over the last five years. Our gross profit also
increased significantly by 28% to £14.4m (FY22 11.3m). Due to the impact of
the deferral of work by certain clients as noted above, our adjusted EBITDA
for FY23 decreased by 43% to £1.5m (FY22 £2.6m). Although this has reduced
our profitability in the short term, we remain confident in our ability to
build our business for the future and deliver long-term returns and value for
all our stakeholders.
Strategic delivery
FY23 is the first full year of results since Made Tech's admission to AIM in
September 2021. At IPO, we set out our strategy to achieve sustained revenue,
profit and cashflow growth by expanding the Group's capabilities, building out
regional hubs and growing the Group's market share within the health, local
government and central government sectors.
In FY23, we continued to make progress against the majority of these strategic
objectives. We have been successful in winning a greater proportion of larger
contracts, which reflects our growing reputation in the market. Our revenues
in the health sector increased by 27% to £5m on the back of the major
contract win in FY22 with NHS Digital, which, although the phasing of work has
been later than originally anticipated and therefore didn't add to our FY23
revenues, is now contributing to our revenues and presence in the health
sector in the current year. We were delighted to be awarded our first
contracts with the Met Office and Crown Commercial Services, which together
with renewals, helped to grow our services to central government by over 60%
to £29m. Our local government services revenues contracted by 16% to £6m due
to budgetary pressures experienced in the year. To better service local
government clients, we moved our focus to developing our first bespoke
Software as a Service ("SaaS") recurring revenue products, investing £1.5m in
FY23 in developing three new SaaS products, specifically designed for the
local government market. These products will deliver value for money for
budget-constrained local authorities and generate recurring revenues at higher
margins for Made Tech, presenting a substantial opportunity. Our first two
products help local government teams to manage their housing stocks,
streamlining repairs and managing voids and the third enables local government
to easily request and validate service users' information quickly and
accurately. The first of these products has launched with a number of clients
actively using these services. Investment in our own intellectual property is
a key part of our longer-term strategy to provide a comprehensive, end-to-end
offering to our clients which spans software and services. We believe this
will both benefit our clients and reduce Made Tech's exposure to variations in
the timing of demand for our services and ultimately add to the resilience of
our business.
Our people are fundamental to the success and sustainability of Made Tech. We
rely on their skills, talent, motivation and commitment to deliver services
and solutions to our clients. We have recently been delighted to recruit an
experienced Chief People Officer strengthening our senior leadership team,
leading our people strategy, and ensuring we create opportunities for our
people to develop and grow with Made Tech over the long term. We continue to
recruit talented individuals across the UK to ensure we have the right mix of
capabilities to meet our client demand. We have paused our progress on
regional hubs as we develop our hybrid working strategy, taking account of the
needs of our people at the same time as optimising the quality of service we
are able to provide to our clients.
We continue to invest in our core services, expanding and strengthening our
range of capabilities. Our design capability now has a team of almost 80
skilled professionals and, during the year, we recruited an experienced leader
to deliver further growth in this area. Our data practice capability now has a
team of around 20 data experts specialising in data science, artificial
intelligence and machine learning and we continue to add to these data
offerings. We are also investing in our transformation services team, as we
seek to engage earlier at a senior level with our clients and to become a
strategic partner as they plan the long-term digital transformation of their
organisations. In addition, we are in the early stages of building our managed
services offering. This strategic progress has helped us to deliver
substantial growth in revenues but we acknowledge that investments made in the
year, to deliver future growth, impacted our profits and cashflows in the year
under review.
As we worked to deliver progress against our strategic commitments during the
year, adjustment of our headcount was required to manage the impact of
clients' changing demands and tailor the mix of our talent pool to deliver the
required range of services. Our people have shown great commitment during and
adaptability to the changes needed over the past year and their dedication
towards both the business and our clients is a credit to them.
The Board believes in the value of having alignment in the interests of our
people with those of our shareholders and remains committed to offering our
employees the opportunity to own shares in the Company. At the FY23 year end,
36% of our people held shares in our business and to promote the alignment of
the interests of our new recruits with those of our shareholders we have
recently awarded equity incentives to key new members of our executive team.
Our financial position remains strong. Unlike many technology businesses, Made
Tech is debt free and our cash balance is robust at £8.5m at the end of FY23,
providing more than sufficient funds to deliver our plans for future organic
growth. This financial strength gives us the flexibility to both invest for
future growth and take advantage of opportunities as they arise.
A responsible business
Following our IPO, we established an ESG Committee to guide and oversee our
progress against environmental, social and governance targets. This is a key
priority for us and the committee is chaired by our CEO and has members who
are enthusiastic volunteers from all across our group, as well as myself and
Helen Gilder from our NED team. We are committed to continuing to develop our
environmental, social and governance priorities embedded within our overall
strategy and as a fundamental part of what it means to be Made Tech. We are
committed to sourcing, designing and offering services and products which
support social responsibility and environmental sustainability. During FY23,
we are pleased to have reduced our overall carbon emissions and our carbon
emissions per employee, achieved carbon neutral status and have set ourselves
the target of being carbon net zero by 2030. Our mission in transforming
public services is to create a fairer and more equitable society, and we
recognise the importance and benefits of diversity in our business. While our
gender diversity remains better than the industry average for the technology
sector we recognise our ongoing imperative to drive improvement in this
space.
We recognise the value of good corporate governance in every part of the
business and consider that compliance with the QCA Code serves the interests
of all our key stakeholders and will support the maintenance and creation of
long-term value in the Company. In FY23, the Board performed an internal
formal evaluation of its performance in its first full year as a listed
company. The review comprised the completion of a comprehensive questionnaire
by all Board members covering the effectiveness of the Board's performance as
a unit, as well as that of its committees and the individual Directors. As
this is the first time of undertaking this review, these results will be used
as a benchmark for the Board and will be assessed again on a yearly basis.
Current trading and outlook
We are aware that the ongoing economic headwinds and the forthcoming general
election will put some pressure on our clients. However, given the UK
government's long term commitment to use technology to improve both its
operations and its interaction with the public, we expect to be able play our
part in delivering this digital transformation for many years to come and look
forward to FY24 with cautious optimism.
To support our future growth, we have made strategic investments in both our
service capabilities and our SaaS products and we have the resources and
intent to continue investment in these areas, as we see them as important
elements in the long-term success of our business. We have also invested in
our executive management and have strengthened our senior leadership team with
the addition of a Chief People Officer to lead our people strategy.
The Group has traded profitability in the first three months of the new
financial year, driven by right sizing of the cost base - improved billable
utilisation, reduced contractor numbers and partner work, improved management
information; and a reduction in spend on capability investments. Our
contracted backlog of £67.9m is at record levels, providing good revenue
cover to FY26 and we have a promising pipeline of further new business
opportunities. In summary, we feel we are well placed to continue Made Tech's
progress as an increasingly important provider of technology services and
products to the UK public sector and we look forward to delivering long-term
returns and value for all our stakeholders.
Joanne Lake
Non-Executive Chair
CHIEF EXECUTIVE'S REVIEW
I am delighted to present the Made Tech Group results for 2023. I want to
start by extending my deepest gratitude to our shareholders, clients and
dedicated team. Your unwavering support and commitment have been instrumental
in navigating the past 12 months, and for that, I am truly thankful.
This year marked our first full year on the public markets, a significant
milestone in our corporate journey. However, it has not been without its
challenges. The macroeconomic landscape has been turbulent, with various
factors causing instability in the wider economic environment. This
instability has particularly affected the core government market within which
we operate.
Despite these challenges, I am proud to report that we have made significant
strategic progress. Our resilience has allowed us to navigate these uncertain
times, and our achievements are a testament to the strength of our business
and the dedication of our team.
We have delivered another year of exceptionally strong organic revenue growth,
up 37% yearly. This continues our impressive track record of organic growth,
with a compound annual growth rate ("CAGR") of c.80% over the last five years,
a market-leading figure within our sector.
The digital transformation market in which we operate remains buoyant. We
expect long-term demand from existing and new clients as they seek to drive
productivity enhancements and capitalise on emerging opportunities, such as
artificial intelligence. Many of these clients lack the necessary in-house
skills, presenting a significant opportunity for our business.
Our brand and market positioning continue to be very strong. We have built a
reputation for excellent digital delivery, and this positions us well to
capitalise on the structural growth opportunities ahead. We remain committed
to delivering value for our shareholders, clients and people, and I am
confident that we are well placed to continue our growth trajectory.
Continuing to grow at a pace
We achieved a record level of sales bookings at £69.9m, a significant
milestone for the Group. This achievement was driven by a substantial number
of contract renewals and expanding our remit with key clients. This is a
testament to the strength of our client relationships and the quality of our
services.
This year, we undertook our first independent customer satisfaction review,
showing an impressive 77% of our clients expressed their strong satisfaction
with the Company. The feedback received highlighted our exceptional
performance in fostering robust client relationships, providing excellent
client service and promoting effective collaboration. We are thrilled with
these results and are committed to maintaining and improving this high level
of customer satisfaction and will continue to conduct these reviews on an
ongoing basis, reporting the results to our investors.
We have also seen a trend of increased contract sizes, winning two contracts
over £10m, seven over £5m and ten over £2m during FY23. This trend reflects
our growing stature in the market, and we expect to see this continue as we
expand our business.
Regarding our sector-specific performance, our revenue in the central
government sector was up 61% to £29m. This was a strong performance, driven
by renewals and winning new mandates with the Met Office and Crown Commercial
Service.
In the health sector, revenue increased by 27% to £5m, and we secured a new
mandate at the Health Security Agency, despite significant changes within NHS
England and NHS Digital seen during the year.
In the local government sector, our revenue decreased by 16% to £6m. We saw
increased budget pressure within the market, which led us to adapt and refocus
our go-to-market strategy for this industry to focus purely on our new
Software as a Service ("SaaS") products.
Expanding the services we offer clients
Our goal has always been to provide an integrated digital transformation
offering to our clients, and I am pleased to highlight significant strides
towards this objective.
Our design capability, which we launched in 2021, has developed impressively.
We now have nearly 80 talented individuals, contributing significantly to the
business and improving the quality of outcomes we deliver to our clients.
Given the scale of this team, we have appointed an experienced and specialised
design leader to drive this area forward.
In 2022, we launched our data practice, which now has a team of approximately
20 data experts specialising in data science, AI and machine learning. We have
continued to invest in developing our data offerings in 2023, further
strengthening our capabilities in an area which we expect to be critical
moving forwards.
We are also in the early stages of building our managed services offering.
Although in its infancy, this new service line has already enabled us to
target new opportunities previously out of reach. We expect contracts and
revenues from this service to be longer term, providing more visible and
committed revenue streams for the future.
We have made significant investments in our transformation service. This is a
key area of focus for us, as we look to position the business as a more
strategic partner, engaging at more senior levels and providing more
transformational impact for our client organisations.
In total, we have invested £0.9m in FY23 to build our core services. These
investments are not just about expanding our capabilities but also about
driving new areas of growth and revenue streams in the years ahead. They build
on our already strong reputation in the market, enabling us to deliver
additional value to clients.
Progressing our product strategy
In addition to expanding our service lines, we have continued investing in
intellectual property ("IP") solutions. This financial year, we spent £1.5m
on developing three new SaaS products, specifically designed for the local
government market.
Our first two products support local authorities in managing their housing
stock. Our Housing Repairs product streamlines the repair process for
residents and is more cost effective for local authorities. Our Voids product
reduces the relet times and housing waiting lists.
Our third product, Evidence, is a software solution enabling local authorities
to verify individual identities and the evidence required to establish
eligibility to access a service. In an increasingly digital world, verifying
identities and eligibility quickly and accurately is crucial, and our Evidence
software provides a reliable solution to this challenge.
We are excited about the opportunities these new products present. We already
have a number of local government clients signed up and using these products,
and we anticipate that this number will grow in the coming years.
Our investment in IP solutions is a key part of our longer-term strategy to
provide a comprehensive, end-to-end transformation offering which spans
software and services. We are excited about the potential of these new
products and their future contribution.
Nurturing our most important assets
Over the past year, we have slowed the pace of our regional expansion, as we
take the time to understand new hybrid working patterns and develop our estate
strategy. This decision reflects our commitment to ensuring that our growth is
sustainable and that we are creating the best possible working environment for
our team.
We have strengthened our senior leadership team with the appointments of Tim
Bardell as Chief Delivery and Transformation Officer and Wayne Searle as Chief
People Officer, as part of our preparations for the next wave of growth. These
changes are designed to ensure we have the right people in the right roles to
drive our business forward. There will be further positive changes in the
coming year, as we continue to strengthen our leadership structure.
Being a responsible business
Environmental, social and governance ("ESG") considerations are increasingly
vital to our stakeholders and are central to our operations. As a key supplier
to the UK government, ESG is crucial to our ability to secure work and
long-term frameworks. Our ESG strategy is deeply integrated into our business,
and we have made significant progress on various fronts in FY23.
Adopting best practice guidelines, like the QCA Code, and taking feedback from
our teams, clients and investors, we have developed our ESG initiatives in a
way that reflects our unique voice. You can find more details in the ESG
section of this FY23 Annual Report.
A positive outlook
Although the economic uncertainty and the forthcoming general election will
continue to put short-term pressure on our clients, we know there is a
commitment to use technology to modernise and improve the way our clients'
organisations operate, and we fully expect to benefit from the digital
transformation opportunity for many years to come.
Our strategic investments in data, managed services, design, transformation
and products set us up for future growth, and we intend to continue investing
for growth in the coming years, confident in the long-term opportunity ahead
for our business.
Our financial position remains strong, as we stay debt free and had a cash
balance of £8.5m at the end of FY23. This financial strength gives us the
flexibility to invest in growth and seize opportunities as they arise. Our
contracted backlog is the strongest it has ever been, providing good revenue
cover to FY26, and we have a promising pipeline of new business opportunities.
In conclusion, while the political and macro environment provides near-term
challenges, we are confident in our ability to navigate them and continue our
growth trajectory. We have a strong team, a clear strategy and a robust
financial position, and we are excited about the opportunities ahead.
I want to end by saying a big thank you to our shareholders, employees,
partners and clients for their ongoing support and we look forward to
continuing to deliver value for you in the years ahead.
Rory MacDonald
Chief Executive Officer
FINANCIAL REVIEW
Adjusted performance measures
The Group uses adjusted measures as key performance indicators, in addition to
those reported under IFRS, as they are more representative of the underlying
performance of the business and enable comparability between periods. These
adjusted measures exclude certain non-operational and exceptional items and
have been consistently applied in all years presented.
Revenue
Revenue for FY23 was £40.2m (FY22: £29.3m), growth of 37%. The organic
growth arose from a combination of strong growth from existing key clients and
winning contracts with new clients.
Gross profit
During the year, there was a decrease in gross profit as a percentage of
turnover, declining by 2.7% from 38.4% to 35.8%. This decrease can primarily
be attributed to a reduction in utilisation, which dropped from 81% to 70%.
The decline in margin was influenced by shifts in the political landscape,
resulting in client project delays and the postponement of awarding new
contracts. In addition, the business faced a period of rising expenses due to
inflationary factors, increases in salaries, and travel costs associated with
transitioning back to on-site work after the pandemic.
Key statistics FY23 FY22 Variance
£'000
£'000
£'000
Revenue 40,195 29,289 10,906
Gross profit 14,393 11,257 3,136
Gross profit margin 35.81% 38.43% (2.6pp)
Adjusted EBITDA 1,521 2,649 (1,128)
Adjusted EBITDA margin 3.79% 9.04% (5.25pp)
Depreciation and amortisation (417) (308) (109)
Share-based payment charge (2,068) (2,376) 308
Exceptional items (574) (224) (350)
Operating loss (1,538) (259) (1,279)
Net finance income/(costs) 11 (29) 40
Tax (72) (20) (52)
Loss for the year (1,599) (308) (1,291)
Weighted average number of shares ('000) 148,885 135,729 13,156
Adjusted earnings per share (pence) 0.34p 1.29p (0.95)p
In order to enhance margins in FY24 and beyond, we have realigned our
headcount with current forecasts and will continue to do so on an ongoing
basis. Over the past year, we have reduced our headcount from 478 at 31 May
2022 to 430 at 31 May 2023. Additionally, we have implemented significant
changes to our capacity management and reporting processes, with the goal of
optimising utilisation moving forward. These improvements will enable us to
maximise productivity and better capitalise on available resources, ultimately
strengthening our margins.
Adjusted EBITDA
Adjusted EBITDA for FY23 was £1.5m (FY22: £2.6m). Adjusted EBITDA margin was
3.8% (FY22: 9.0%). During the year, the Company continued to invest in new
capabilities, clients and bids, to support future revenue growth. We expect
our pace of expansion to moderate in the coming year due to the upcoming
general election and an increase in public sector competition driven by a
slowdown in public sector spending. Despite this, we have our largest ever
contracted backlog moving into FY24 at £67.9m, giving us good revenue cover
to FY26.
Operating loss
The £1.5m operating loss for the year (FY22: £0.3m operating loss) includes
a £2.1m share-based payment charge (FY22: £2.4m) and exceptional items of
£0.6m (FY22: £0.2m).
Total operating expenses were £15.9m (FY22: £11.5m). Operating expenses
excluding share-based payment charges and exceptional items increased by 50%
to £13.4m (FY22: £8.9m) to support future revenue growth.
Share-based payment charge
The total charge for the period under IFRS 2 Share-based Payment was £2.1m
(FY22: £2.4m). This charge related to the FY21, FY22 and FY23 awards made
under the Long Term Incentive Plan and the Group Restricted Share Plan ("RSP")
launched on 30 September 2021.
Exceptional items
Exceptional costs in the year were £574,000 (FY22: £224,000). Costs in FY23
comprised £493k related to severance payments and £80k related to
reorganisation and restructuring costs, as changes were made to align
headcount with anticipated revenue following the delays and postponements of
client contracts and revenue (FY22: £180,000 related to the Group's admission
to AIM in September 2021 and £45,000 related to severance payments).
Taxation
The total taxation charge was a charge of £72,000 (FY22: £19,760), giving
rise to an effective tax credit/(charge) of 5% (FY22: (7%)). The charge is
lower than the UK standard rate of taxation due to the use of tax losses
brought forward. In future years, we would expect the Group's effective rate
of tax to move closer to the UK corporation tax rate.
Basic earnings per share
The earnings per share analysis above covers both adjusted earnings per share
(profit after tax before amortisation of intangibles, share-based payment
charge and exceptional items divided by the weighted average number of shares
in issue during the year), and statutory earnings per share (profit
attributable to equity holders divided by the weighted average number of
shares in issue during the year). Adjusted profit after tax was £1.0m (FY22:
£2.3m), a decrease in adjusted earnings per share of 0.95 pence. Basic
earnings per share was negative in both years due to the loss position.
Cash flow
Cash at year end was £8.5m (FY22: £12.3m). The Group's current cash reserves
provide sufficient capital to fund current planned product development and
working capital as the business continues to grow. Cash flow for the year is
set out below.
The combined underlying trade debtor and other receivables totalled £6.2m
(FY22: £6.1m). The increase of 8% is in line with expectations, given revenue
growth.
Cash flow FY23 FY22 Variance
£'000
£'000
£'000
Adjusted EBITDA 1,521 2,649 (1,128)
Movement in working capital (1,477) (750) (727)
Capital expenditure investment (3,144) (2,336) (808)
Adjusted operating cash flow (3,100) (437) (2,663)
Taxation - - -
Net finance cash flows (194) 12,072 (12,266)
Exceptional items (574) (224) (350)
Others 9 - 9
Net cash flow (3,859) 11,411 (15,270)
Adjusted EBITDA to adjusted operating cash flow conversion (203.81%) (16.49%) (187.32%)
Adjusted operating cash flow
Operating cash flow before tax payments, net finance costs and payments in
respect of exceptional items reduced by £2.7m. This includes £3.2m of
capital expenditure investment, of which £3.1m related to ongoing investment
in IP to support future growth.
Balance sheet and shareholders' funds
Net assets increased in the year by £424k. Non-current assets include £5m of
investment in capitalised product development and IP solution costs (see
below). The balance sheet is summarised below:
Net assets FY23 FY22 Variance
£'000
£'000
£'000
Non-current assets 5,512 2,783 2,729
Working capital 1,365 (9) 1,374
Cash 8,474 12,333 (3,859)
Lease liability (140) (320) 180
Other net assets - - -
Net assets 15,211 14,787 424
Capitalised product development and IP solutions costs
The Group continues to invest in product development and IP solutions. Our IP
solutions act as business accelerators for the clients we serve. These include
business solutions encompassing commercial software embedded within our
end-to-end service, and digital enablers such as methodologies and frameworks
to drive change across business and IT processes. Where these investments are
expected to result in future revenue, costs incurred that meet the definition
of product development and IP solutions in accordance with IAS 38 Intangible
Assets are capitalised in the statement of financial position. During the
year, the Group capitalised £3.1m in respect of product development (FY22:
£1.9m).
Dividend policy
On admission to AIM in September 2021, the Group's stated intention was to
make dividend payments, and this policy remains in place. However, as we
believe that the opportunities ahead are significant, we have taken the
decision to retain cash in the business and not pay a dividend in respect of
FY23. The Board will review the decision to pay a dividend in FY24, and will
provide an update in the Company's half year results, scheduled for
announcement in February 2024.
Alternative performance measures ("APMs")
Throughout the Annual Report and Accounts the Group has used a number of APMs.
These are used to provide additional clarity to the Group's financial
performance and are used internally by management to monitor business
performance, in its budgeting and forecasting and also for determination of
Directors' and senior management's remuneration. These APMs are not defined
under IFRS and, therefore, may not be directly comparable with adjusted
measures presented by other companies. The non-GAAP measures are not intended
to be a substitute for or superior to any IFRS measures of performance.
However, they are considered by management to be important measures used in
the business for assessing performance.
The following are key non-GAAP measures identified by the Group and used in
the Strategic Report and financial statements:
• adjusted EBITDA: operating profit before depreciation, amortisation,
share-based payments charge and exceptional items;
• adjusted operating profit: operating profit before amortisation of
intangible assets, share-based payments charge and exceptional items;
• adjusted profit before tax: profit before tax, amortisation of
intangible assets, share-based payments charge and exceptional items;
• adjusted earnings: profit after tax before amortisation of intangible
assets, share-based payments charge and exceptional items less net finance
costs and taxation;
• adjusted earnings per share: adjusted earnings divided by a weighted
average number of shares in issue; and
• adjusted operating cash flow: adjusted EBITDA less movements in
working capital, capital expenditure and lease payments.
The adjusted profit measures can be reconciled to the reported statutory
numbers as follows:
Adjusted EBITDA:
FY23 FY22 Variance
£'000
£'000
£'000
Loss after tax (1,599) (308) (1,291)
Interest (receivable)/payable (11) 29 (40)
Taxation 72 20 52
Loss before interest and taxation (1,538) (259) (1,279)
Depreciation 417 308 109
Share-based payment charge 2,068 2,376 (308)
Exceptional items 574 224 370
Adjusted EBITDA 1,521 2,649 (1,128)
Adjusted profit/(loss) before tax:
FY23 FY22 Variance
£'000
£'000
£'000
Statutory loss before tax (1,527) (288) (1,239)
Share-based payment expense and related costs 2,068 2,376 (308)
Exceptional items 574 224 370
Adjusted profit/(loss) before tax 1,115 2,312 (1,197)
Adjusted profit/(loss) after tax:
FY23 FY22 Variance
£'000
£'000
£'000
Statutory loss after tax (1,599) (308) (1,291)
Share-based payment expense and related costs 2,068 2,376 (308)
Exceptional items 574 224 350
Adjusted profit/(loss) after tax 1,043 2,292 (1,249)
Deborah Lovegrove
Chief Financial Officer
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
Note FY23 FY22
£'000 £'000
Revenue 40,195 29,289
Cost of sales (25,802) (18,032)
Gross profit 14,393 11,257
Administrative expenses (12,931) (8,608)
Share-based payments 15 (2,068) (2,376)
Depreciation 11 (417) (308)
Exceptional items 7 (574) (224)
Other income 59 -
Operating loss (1,538) (259)
Interest payable 6 (14) (29)
Interest receivable 6 25
Loss before tax (1,527) (288)
Taxation expense 8 (72) (20)
Loss for the period (1,599) (308)
Total comprehensive loss attributable to the owners of the parent (1,599) (308)
Loss per share:
Loss per ordinary share 9 (1.07p) (0.22p)
Diluted loss per ordinary share 9 (1.07p) (0.22p)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note FY23 FY22
£'000 £'000
Assets
Non-current assets
Tangible assets 11 499 879
Intangible assets 10 5,013 1,904
Total non-current assets 5,512 2,783
Current assets
Trade and other receivables 6,193 6,065
Cash and cash equivalents 8,474 12,333
Total current assets 14,667 18,398
Total assets 20,179 21,181
Equity and liabilities
Equity
Share capital 75 74
Share premium 13,421 13,421
Share-based payment reserve 4,398 2,376
Deferred share reserve - 12
Capital redemption reserve 12 -
Retained deficit (2,695) (1,096)
15,211 14,787
Non-current Liabilities
Lease liabilities - 140
Deferred tax liability 14 92 20
Total non-current liabilities 92 160
Current liabilities
Trade and other payables 4,736 6,054
Lease liabilities 12 140 180
Total current liabilities 4,876 6,234
Total liabilities 4,968 6,394
Total equity and liabilities 20,179 21,181
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Share-based payment reserve Deferred share Retained earnings Total equity/
£'000 £'000 £'000 reserve £'000 (deficit)
£'000 Capital redemption reserve £'000
£'000
Equity at 1 June 2021 1 - - - - (788) (787)
Loss for the period - - - - - (308) (308)
Transactions with equity owners:
Issue of shares 73 13,421 - 12 - - 13,506
Share-based payment reserve - - 2,376 - - - 2,376
Total transactions with equity owners 73 13,421 2,376 12 - - 15,882
Balance at 31 May 2022 74 13,421 2,376 12 - (1,096) 14,787
Equity/(deficit) at 1 June 2022 74 13,421 2,376 12 - (1,096) 14,787
Loss for the period - - - - - (1,599) (1,599)
Transactions with equity owners:
Issue of shares 1 - - - - - 1
Cancellation of deferred shares - - - (12) 12 - -
Share-based payment reserve - - 2,022 - - - 2,022
Total transactions with equity owners 1 12 2,022 (12) 12 - 2023
Balance at 31 May 2023 75 13,421 4,398 - 12 (2,695) 15,211
CONSOLIDATED CASH FLOW STATEMENT
Note FY23 FY22
£'000 £'000
Loss for the period (1,599) (308)
Adjustments for:
Tax charge 8 72 20
Net finance (credit)/charge in the income statement 6 (11) 29
Loss on disposal of property, plant and equipment 9 -
Depreciation of property, plant and equipment 11 417 308
Share-based payment 2,068 2,376
Cash flows from operating activities before changes in working capital 956 2,425
Increase in trade and other receivables (128) (3,521)
Decrease/(increase) in trade and other payables (1,349) 2,771
Net cash flows (used by)/from operating activities (521) 1,675
Cash flows from investing activities
Purchase of property, plant and equipment 11 (60) (432)
Addition of intangibles 10 (3,109) (1,904)
Interest and other fees received 6 25 -
Net cash flows used by investing activities (3,144) (2,336)
Cash flows from financing activities
Issue of equity shares - 13,506
Interest and other fees paid 6 (4) (12)
Repayment of loans and borrowings - (1,250)
Repayment of lease liability 13 (180) (155)
Interest paid on lease liability (10) (17)
Net cash flows from/(used by) financing activities (194) 12,072
Net increase in cash and cash equivalents (3,859) 11,411
Cash and cash equivalents at the start of the period 12,333 922
Cash and cash equivalents at the end of the period 8,474 12,333
NOTES TO THE FINANCIAL STATEMENTS
1. Company information
The consolidated financial information represents the results of Made Tech
Group Plc (the "Company") and its subsidiary, together comprising the Group
("Made Tech Group Plc" or the "Group").
Made Tech Group Plc is a company incorporated and domiciled in England and
Wales, registration number 12204805. The address of its registered office is 4
O'Meara St, London SE1 1TE.
Made Tech Group Plc is quoted on the London Stock Exchange.
The principal activity of Made Tech Group Plc (the "Company") is that of a
holding company. The main trading company of the Group is Made Tech Limited
(company number 06591591) and the principal activity of this company is a
provider of digital, data and technology services to the UK public sector.
Service offerings include digital service delivery, embedded capabilities,
data infrastructure and insights and legacy application transformation.
2. Accounting policies
Accounting convention
The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out below. They have been
consistently applied to the periods presented. The financial statements are
presented in Sterling rounded to the nearest thousand (£'000) except where
specified.
Basis of preparation of the consolidated financial statements
The Group financial statements have 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 Company financial statements have been prepared under FRS 102. Both
financial statements have been prepared on the historical cost basis with the
exception of certain items which are measured at fair value as disclosed in
the principal accounting policies set out below. These policies have been
consistently applied to all years presented unless otherwise stated.
Going concern
The Directors have considered the Group's cash flow forecasts and they have no
grounds for concern regarding the Group's ability to meet its obligations as
they fall due and continue to operate within the existing cash balance and
working capital facilities, thus requiring no additional funding to maintain
liquidity.
In reaching their decision to prepare the financial statements on a going
concern basis, the Directors have a reasonable expectation that the Company
and the Group have 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.
Standards and amendments to existing standards adopted in these accounts
In the current year, the Group has applied the following standards and
amendments for the first time for its annual reporting period commencing 1
June 2022:
· IAS 1 Presentation of Financial Statements and IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors (Amendment - Definition
of Material);
· IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Introduce a new definition for accounting estimates); and
· IAS 12 Income Taxes (Amendment - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction).
· Their adoption has not had any material impact on the disclosures or
on the amounts reported in these financial statements.
Standards, amendments and interpretations to existing standards that are not
yet effective and have not been early adopted by the Company in the 31 May
2023 financial statements
At the date of authorisation of these financial statements, certain new
accounting standards and interpretations have been published that are not
mandatory for 31 May 2023 reporting periods and have not been early adopted by
the Group. The Directors continue to monitor developments in the accounting
standards they see as relevant, but do not expect that the adoption of these
standards will have a material impact on the financial statements of the Group
in the current or future reporting periods and on foreseeable future
transactions.
Basis of consolidation
The Group's consolidated financial statements incorporate the results of the
parent company and all of its subsidiary undertakings. The parent controls a
subsidiary if it is exposed, or has rights, to variable returns from its
involvement with the subsidiary and has the ability to affect those returns
through its power over the subsidiary. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated on the date control ceases.
Inter-company transactions, balances and unrealised gains and losses (where
they do not provide evidence of impairment of the asset transferred) on
transactions between Group companies are eliminated.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with policies adopted by the Group.
Revenue recognition
Revenue is the fair value of the total amount receivable by the Group for
supplies of services. VAT or similar local taxes and trade discounts are
excluded. The Group's only source of revenue is from the provision of digital,
data and technology services to the UK public sector, all of which are
recognised in the same manner.
Contracts for the provision of services are typically "time and materials"
contracts whereby the customer is contractually bound to pay for services for
each hour or day spent in delivering a contractually agreed services scope.
Materials are incidental expenses incurred whilst delivering the services.
These contracts typically have no payment milestones or bundling with other
services and have no variable element. Revenue is therefore recognised in line
with the chargeable "time and materials" which are allocated to the contracted
project.
The Group recognised revenue each month once as it provides these services for
the duration of the contract. At the balance sheet date, an asset is
recognised for unbilled amounts for services provided yet to be invoiced.
Payment for the services is based on the agreed payment terms.
Revenue contract liability is recorded when cash payments are received in
advance of satisfying the performance obligation. Contract liabilities are
recognised in profit or loss in the period when the Group completes the agreed
services to the customers. In all other cases payments are due from customers
within 30-60 days (depending on the credit terms applicable) of the service
being agreed and invoiced.
Interest income and expenditure are reported on an accruals basis.
EBITDA and adjusted EBITDA
Earnings before interest, taxation, depreciation and amortisation ("EBITDA")
and adjusted EBITDA are non‑GAAP measures used by management to assess the
operating performance of the Group. EBITDA is defined as operating profit
before depreciation and amortisation. Exceptional items and share-based
payment charge are excluded from EBITDA to calculate adjusted EBITDA.
The Directors primarily use the adjusted EBITDA measure when making decisions
about the Group's activities. As they are non-GAAP measures, EBITDA and
adjusted EBITDA measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
Exceptional items
The Group's income statement separately identifies exceptional items. Such
items are those that in the Directors' judgement are one off in nature or
non-operating and need to be disclosed separately by virtue of their size or
incidence. In determining whether an item should be disclosed as an
exceptional item, the Directors consider quantitative and qualitative factors
such as the frequency, predictability of occurrence and significance. This is
consistent with the way financial performance is measured by management and
reported to the Board.
Intangible assets
Internally generated intellectual property
An internally generated intangible asset consisting of intellectual property
arising from development (or the development phase) of an internal project is
recognised if, and only if, all of the following have been demonstrated:
· the technical feasibility of completing the intangible asset so that
it will be available for use or sale;
· the intention to complete the intangible asset and use or sell it;
· the ability to use or sell the intangible asset;
· how the intangible asset will generate probable future economic
benefits;
· the availability of adequate technical, financial and other resources
to complete the development and to use or sell the intangible asset; and
· the ability to measure reliably the expenditure attributable to the
intangible asset during its development.
Internally generated intellectual property continued
The amount initially recognised for internally generated intangible assets is
the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above. Where no internally
generated intangible asset can be recognised, development expenditure is
charged to profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses. Internally generated intangibles not yet in use are not amortised but
are subject to annual impairment testing.
As yet, no internally generated intangible assets are being amortised.
Internally generated intangible assets are expected to be amortised over three
to five years.
Research expenditure is recognised as an expense in the period in which it is
incurred.
Tangible assets
Tangible assets are recorded at cost net of accumulated depreciation and any
provision for impairment. Depreciation is provided to write off the cost of
the asset less any residual value over its useful economic life in line with
below. The residual values of assets are reviewed annually and revised where
necessary. Assets' useful economic lives are as follows:
Furniture and fittings 25% reducing balance
Office equipment 3 years straight
line
Leasehold improvements 25% reducing balance
Right-of-use lease assets straight line over the lease term
Impairment
For the purposes of assessing impairment, assets are grouped at the lowest
level for which there are separately identifiable cash flows. As a result,
some assets are tested individually for impairment and some are tested at
cash-generating unit level.
Intangible assets not yet available for use are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the carrying amount exceeds the recoverable amount of the
asset or cash-generating unit. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value in use based
on an internal discounted cash flow evaluation. The cash flow evaluations are
a result of the Directors' estimation of future sales and expenses based on
their past experience and the current market activity within the business.
With the exception of goodwill, which the Group does not currently have, all
assets are subsequently reassessed for indications that an impairment loss
previously recognised may no longer exist.
Any impairment charge arising from the review of the carrying value of assets,
where material, is disclosed separately on the face of the consolidated income
statement.
Financial assets
Financial assets and liabilities are recognised when the Group becomes party
to the contractual obligations of a financial instrument. They are measured
initially at fair value, net of transaction costs. The Group subsequently
classifies and measures its financial assets as either financial assets at
fair value through profit or loss, at amortised cost, or fair value through
comprehensive income, as appropriate. The classification depends on the
purpose for which the financial assets were acquired. At the reporting year
end the financial assets of the Group were all classified as loans or
receivables held at amortised cost.
Trade receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through the provision of goods and services to customers but also incorporate
other types of contractual monetary assets.
They are initially recognised at fair value and measured subsequent to initial
recognition at amortised cost using the effective interest method, less any
impairment loss.
The Group's financial assets comprise trade receivables, other receivables
(excluding prepayments) and cash and cash equivalents.
Trade and other receivables - impairment
The Group applies an expected credit loss model to calculate the impairment
losses on its trade receivables. The Group applies the simplified approach to
providing for expected credit losses prescribed by IFRS 9, which permits the
use of the lifetime expected loss provision for all trade receivables. Trade
receivables at the reporting date have been put into groups based on days past
the due date for payment and an expected loss percentage has been applied to
each group to generate the expected credit loss provision for each group and a
total expected credit loss provision has thus been calculated.
Financial liabilities
The Group's financial liabilities include trade and other payables and
borrowings which include lease liabilities.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest-related charges are
recognised as an expense in the income statement.
Trade payables are recognised initially at their fair value, net of
transaction costs and subsequently measured at amortised cost less settlement
payments.
Leases
At inception the Group assesses whether a contract contains a lease. This
assessment involved the exercise of judgement about whether the Group obtains
substantially all the economic benefits from the use of that asset and whether
the Group has the right to direct the use of the asset.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the underlying asset
or to restore the underlying asset or the site on which it is located, less
any lease incentive received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. The estimated useful
lives of right-of-use assets are determined on the same basis as those of
property and equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less
and leases of low value assets which it defines as having a purchase cost of
£5,000 or less. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
The lease liability is measured at amortised cost using the effective interest
method.
The Group presents right-of-use assets in "property, plant and equipment" and
lease liabilities in "borrowings" in the statement of financial position.
Taxation
Current tax
Current income tax assets and liabilities comprise those obligations to fiscal
authorities in the countries in which the Group carries out its operations.
They are calculated according to the tax rates and tax laws applicable to the
fiscal period and the country to which they relate. All changes to current tax
liabilities are recognised as a component of tax expense in the income
statement unless the tax relates to an item taken directly to equity, in which
case the tax is also taken directly to equity. Tax relating to items
recognised in other comprehensive income is recognised in other comprehensive
income.
Deferred tax
Deferred income taxes are calculated using the liability method on temporary
differences between the carrying amounts of assets and liabilities and their
tax bases.
A deferred tax asset is recognised for all deductible temporary differences to
the extent that it is probable that taxable profit will be available against
which the deductible temporary differences can be utilised. Deferred tax is
not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries is not provided
if reversal of these temporary differences can be controlled by the Group and
it is probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward as well as other income
tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets,
such as those resulting from assessing deferred tax on the expense of
share-based payments, are recognised to the extent that it is probable that
future taxable profits will be available against which the temporary
differences can be utilised. Deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
balance sheet date.
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the present obligations arising from legal or
constructive commitment resulting from past events will probably lead to an
outflow of economic resources from the Group which can be estimated reliably.
Provisions are measured at the present value of the estimated expenditure
required to settle the present obligation, based on the most reliable evidence
available at the reporting date taking into account risks and uncertainties
surrounding the obligation.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimates.
Employee benefits
The Group provides a range of benefits to employees, including annual bonus
arrangements, paid holiday arrangements and defined contribution pension
plans.
Short-term benefits, including holiday pay and other similar non-monetary
benefits, are recognised as an expense in the period in which the service is
received.
Termination benefits are recognised immediately as an expense when the Group
is demonstrably committed to terminate the employment of an employee or to
provide termination benefits.
Defined contribution pension plan
The Group operates a defined contribution pension scheme. The assets are held
separately from those of the Company in an independently administered fund.
The pension cost charge represents contributions payable by the Company to the
fund and is further detailed in note 7. Other creditors include £206,643
(FY22: £190,148) in respect of pension contributions committed but not yet
paid at year end.
The cost of pensions in respect of the Group's defined contribution scheme is
charged to the income statement in the period in which the related employee
services were provided.
Share-based payments
The Group operates equity settled share-based compensation plans for the
remuneration of its employees.
All employee services received in exchange for the grant of any share-based
compensation are measured at their fair values. These are indirectly
determined by reference to the share options awarded. Their value is appraised
at the grant date and excludes the impact of any non-market vesting conditions
(e.g. profitability or sales growth targets).
All share-based compensation is ultimately recognised as an expense in the
income statement with a corresponding credit to the share-based payment
reserve, net of deferred tax where applicable. If vesting periods or other
vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected
to vest. Fair value of the awards are measured using the Black-Scholes
valuation model. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable. Estimates
are subsequently revised if there is any indication that the number of share
options expected to vest differs from previous estimates. No adjustment to
expense recognised in prior periods is made if fewer share options ultimately
are exercised than originally estimated. The impact of the revision of the
original estimates, if any, is recognised in the statement of comprehensive
income over the remaining vesting period, with a corresponding adjustment to
the share-based payment reserve.
Where modifications are made to the vesting or lapse dates of options the
excess of the fair value of the revised options over the fair value of the
original options at the modification date is expensed over the remaining
vesting period.
Equity and reserves
Issued share capital
Ordinary shares are classified as equity. The nominal value of shares is
included in issued capital.
Share premium
The share premium account represents the excess over nominal value of the fair
value of consideration received for equity shares, net of the expenses of the
share issue.
Share-based payment reserve
The share-based payment reserve represents the total value expensed at the
balance sheet date in relation to the fair value of the share options at their
grant date expensed over the vesting period under the relevant share option
schemes.
Deferred shares
Ordinary deferred shares are classified as equity. The nominal value of shares
is included in deferred share capital.
Retained earnings
The retained earnings include all current and prior period results for the
Group and the results of the Group's subsidiaries as determined by the income
statement net of dividends paid.
Dividends
Final equity dividends to the shareholders of the Group are recognised in the
period that they are approved by shareholders. Interim equity dividends are
recognised in the period that they are paid. Dividends receivable are
recognised when the Group's right to receive payment is established.
3. Judgements in applying accounting policies and key sources of
estimation uncertainty
The preparation of financial statements requires management to make
judgements, estimations and assumptions that affect the amounts reported for
assets and liabilities as at the year-end date and the amounts reported for
revenues and expenses during the year. These judgements and estimates are
based on management's best knowledge of the relevant facts and circumstances,
their historical experience and other factors including expectations of future
events. Actual results may differ from the amounts included in the financial
statements. The estimates and assumptions that have a significant risk of
material adjustment to the carrying amount of assets and liabilities within
the next financial year are summarised below:
Judgements in applying accounting policies
Development costs
Capitalisation of development costs in accordance with IAS 38 requires
analysis of the technical feasibility and commercial viability of the project
in the future. This in turn requires a long-term judgement to be made about
the development of the industry in which the development will be marketed.
Where the Directors consider that sufficient evidence exists surrounding the
technical feasibility and commercial viability of the project which indicates
that the costs incurred will be recovered they are capitalised within
intangible fixed assets. The amount of the capitalisation is based on
estimates to judge the percentage of the time relevant staff spend on
projects. Where insufficient evidence exists, the costs are expensed to the
income statement.
Sources of estimation uncertainty
Impairment of intangible assets
Determining whether intangible assets are impaired requires an estimation of
the value in use of the cash‑generating unit to which the intangibles have
been allocated. The value in use calculations require an estimation of the
future cash flows expected to arise from the cash-generating units and a
suitable discount rate to calculate the present value.
Impairment of intangible assets
An assessment of impairment of intangibles is performed if there is an
indicator of impairment. The key estimate for the carrying value of the
intangibles is the cash flows associated with the investment and the WACC.
Each intangible is reviewed regularly to ensure that it generates discounted
positive cash flows.
The same principles used in the assessment of impairment of goodwill are used
for estimating the "value in use" of the cash flows of the investment. Where
there is an indication of impairment, the investment is impaired by a charge
to the consolidated income statement. The key area of uncertainty is the
revenue growth. Management performs sensitivity analysis to ascertain the
level of growth rate that will start to impair the investment on a yearly
basis.
4. Financial instruments - risk management
The Board of Directors of Made Tech Group Plc has overall responsibility for
the determination of the Group's risk management objectives and policies. The
Group has in place a risk management programme that seeks to limit the adverse
effects on the financial performance of the Group. All funding requirements
and financial risks are managed based on policies and procedures adopted by
the Board.
The Group does not enter into derivative transactions or trade in financial
instruments and the Directors believe the Group is not materially exposed to
commodity price risk.
The Group is exposed to the following financial risks:
· credit risk;
· liquidity risk; and
· interest rate risk.
The Group is exposed to risks that arise from its use of financial
instruments. The principal financial instruments used by the Group, from which
financial instrument risk arises, are as follows:
· trade and other receivables;
· cash and cash equivalents; and
· trade and other payables.
To the extent financial instruments are not carried at fair value in the
consolidated statement of financial position, book value approximates to fair
value.
Trade and other receivables are measured at amortised cost. Book values and
expected cash flows are reviewed by the Board and any impairment charged to
the consolidated statement of comprehensive income in the relevant period.
Trade and other payables are measured at amortised cost.
Financial instruments by category
Financial assets At 31 May 2023 £'000 At 31 May 2022 £'000
Cash and cash equivalents 8,474 12,333
Trade receivables 4,304 4,400
Other receivables 1,889 1,665
Financial assets at amortised cost 14,667 18,398
Financial liabilities At 31 May 2023 £'000 At 31 May 2022 £'000
Current
Trade payables 1,634 2,705
Accruals 1,005 1,255
Social security and other taxes 1,889 1,891
Other payables 208 203
Trade and other payables 4,736 6,054
Non-current
Borrowings - lease liability - 142
Current
Borrowings - lease liability 140 180
Loans and borrowings 140 322
Financial liabilities at amortised cost 4,876 6,376
The key risks to the Group and the policies and procedures put in place by
management to manage them are summarised below:
Interest rate risk
The Group is exposed to cash flow interest rate risk from bank borrowings at
variable rates. As at 31 May 2023 there are no loans outstanding (FY22:
£nil); therefore there is no material exposure to interest rate risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from credit sales. The
Group's net trade receivables for the two reported periods are disclosed in
the financial assets table above.
The Group considers that its exposure to credit risk is insignificant as it
carries out work for public sector entities without the risks attached to
normal commercial credit sales.
The Directors do not consider that there is any concentration of risk within
other receivables.
Credit risk on cash and cash equivalents is considered to be small as the
counterparties are substantial banks with high credit ratings. The maximum
exposure is the amount of the deposit. To date, the Group has not experienced
any losses on its cash and cash equivalent deposits.
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
At 31 May 2023 Within 1 month 1-3 months 3-12 months 2-5 years 5+ years
£'000 £'000 £'000 £'000
Trade Payables 1,634 - - - -
Accruals 554 257 194 - -
Other payables 2,097 - - - -
Bank loans - - - - -
Lease liability - 47 93 - -
4,285 304 287 - -
At 31 May 2022 Within 1 month 1-3 months 3-12 months 2-5 years 5+ years
£'000 £'000 £'000 £'000
Trade Payables 2,705 - - - -
Accruals 939 113 173 - -
Other payables 203 - - - -
Bank loans - - - - -
Lease liability - 47 133 142 -
3,847 160 306 142 -
Capital management
The Group's capital is made up as follows:
At At
31 May 2023 31 May 2022
£'000 £'000
Share capital - issued 75 74
Share capital - deferred - 12
Share premium 13,433 13,421
Share based payment reserve 4,398 2,376
Retained deficit (2,695) (1,096)
15,211 14,787
The Group's objectives when maintaining capital are:
· to safeguard the entity's ability to continue as a going concern, so
that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
· to provide an adequate return to shareholders by pricing services
commensurately with the level of risk.
The capital structure of the Group consists of shareholders' equity as set out
in the consolidated statement of changes in equity. All working capital
requirements are financed from existing cash resources, fundraising and
borrowings.
5. Operating profit/(loss)
The operating profit/(loss) has been arrived at after charging/(crediting):
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Fees paid to the Group's auditors (see below) 56 186
Other accountancy fees 26 26
Loss on disposal of property, plant and equipment 9 -
Advertising expense 548 388
Depreciation of property, plant and equipment 417 308
Staff costs 30,904 19,546
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Analysis of the fees paid to the Group's auditors
Audit of the Group and Company's financial statement 56 47
Other services - 139
Total fees paid to Groups auditor 56 186
Other services provided by the Groups' auditors relate to professional
services in connection with the Group's IPO in September 2021.
6. Interest receivable/(payable)
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Interest received 25 -
Interest on bank loans and bank fees (4) (12)
Interest on lease liability (10) (17)
Total interest receivable/(payable) 11 (29)
7. Exceptional items
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Transaction and IPO-related costs - 180
Termination costs 493 44
Restructuring costs 81 -
Total exceptional items 574 224
Exceptional items relate to the following:
· termination costs - relating to severance for twenty employees exited in
the year (FY22: three employees); and
· restructuring costs - relating to reorganisation and restructuring
improvements to improve efficiency and accountability.
8. Taxation
The following tax was recognised in the income statement:
31 May 2023 31 May 2022
£'000 £'000
Corporation tax - -
Total current tax expense - -
Deferred tax
Origination and reversal of timing differences 72 20
Tax charge for the year 72 20
The tax assessed for the year is different from the standard rate of
corporation tax as applied in the respective trading domains where the Group
operates.
The Group's tax charge can be reconciled to the profit/(loss) in the income
statement and effective tax rate as follows:
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Loss before tax (1,527) (288)
Tax credit at the UK corporation tax rate of 20% (FY22: 19%) (305) (55)
Effects of:
Fixed asset differences 37 (53)
Expenses not deductible for tax purposes 461 485
Utilisation of losses brought forward (28) (32)
Unused tax losses 462 17
IP capitalisation (622) (362)
Sundry items (5) -
Movement in deferred tax provision 72 20
Tax charge for the year 72 20
Deferred tax Year to Year to
31 May 2023 31 May 2022
£'000 £'000
At 1 June 20 -
Deferred tax recognised - -
Charge 72 20
At 31 May 92 20
Current taxes comprise the income taxes of the Group companies which posted a
taxable profit for the year, while deferred taxes show changes in deferred tax
assets and liabilities which were recognised by the Group on the temporary
differences between the carrying amount of assets and liabilities and their
amount calculated for tax purposes and, on consolidation adjustments,
calculated using the rates that are expected to apply in the year these
differences will reverse.
No deferred tax has been provided on share based payments amounting to
£181,302.
At the reporting date, the Group has unused tax losses of £3.1m (FY22:
£0.8m) available for offset against future profits. No deferred tax asset has
been recognised in respect of these losses due to the uncertainty of the
timing of future taxable profits forecast at the balance sheet date.
Factors that may affect future tax charges
On 24 May 2021, the UK Finance Act 2021 was substantively enacted, increasing
the UK corporation tax rate to 25% effective from 1 April 2023. The impact of
this rate change has been considered when recognising the deferred tax in
relation to the UK companies in the Group. Where the asset or liability is
expected to unwind after 1 April 2023 the deferred tax has been recognised at
25%.
9. Loss per ordinary share
Loss per ordinary share FY23 FY22
£'000 £'000
Loss for the period (1,599) (308)
Weighted average number of ordinary share in issue for the year ('000) 148,885 135,729
Loss per ordinary share (pence)
Basic loss per share (1.07p) (0.22p)
Diluted loss per share (1.07p) (0.22p)
Where a loss has been recorded the effect of options is not dilutive and
therefore the basic and diluted figure is the same.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares. The Company has potentially dilutive ordinary shares arising from
share options granted to employees. Options are dilutive under the Group
Restricted Share Plan ("RSP") where the exercise price, together with the
future IFRS 2 charge of the option, is less than the average market price of
the Company's ordinary shares during the year. Options under the LTIP schemes,
as defined by IFRS 2, are contingently issuable shares and are therefore only
included within the calculation of diluted EPS if the performance conditions,
as set out in note 24, are satisfied at the end of the reporting period,
irrespective of whether this is the end of the vesting period or not.
The calculation of adjusted earnings per share is based on the after tax
adjusted operating loss after adding back certain costs as detailed in the
table below. Adjusted earnings per share figures are given to exclude the
effects of share-based payments and exceptional items, all net of taxation,
and are considered to show the underlying performance of the Group.
The adjusted basic earnings per share is calculated by dividing the adjusted
profit/(loss) after tax for the year by the weighted average number of
ordinary shares in issue during the period.
FY23 FY22
£'000 £'000
Loss for the period (1,599) (308)
Share based payments (including associated taxes) 2,068 2,376
Exceptional items 574 224
Tax effect of the above (528) (494)
Adjusted profit after tax for the year 515 1,798
Weighted average number of ordinary share in issue for the year ('000) 148,885 135,729
Effect of dilutive potential ordinary shares from share options 4,097 3,962
Weighted average number of ordinary shares for the purposes of diluted 152,982 139,691
earnings per share ('000)
Adjusted Basic earnings per share 0.35p 1.33p
Adjusted diluted earnings per share 0.34p 1.29p
10. Intangible assets
Intellectual Total
property £'000
£'000
Cost
At 1 June 2021 - -
Additions 1,904 1,904
At 31 May 2022 1,904 1,904
Additions 3,109 3,109
At 31 May 2023 5,013 5,013
Amortisation
At 1 June 2021 - -
Charge for period - -
At 31 May 2022 - -
Charge for period - -
At 31 May 2023 - -
Net book value
At 31 May 2022 1,904 1,904
At 31 May 2023 5,013 5,013
During the year the Group has capitalised costs relating to intellectual
property. This is an internally generated intangible asset that is currently
still in the process of completion. Upon completion the intellectual property
is expected to be amortised over a useful life of three to five years.
Personnel costs of £3,028,623 (FY22: £1,809,293) have been capitalised as
intangible assets.
Intangible assets have been tested for impairment by assessing the value in
use of the cash-generating units ("CGUs"). The value in use calculations were
based on projected cash flows in perpetuity. Cash flows were based on five
year forecasts with varying growth rates derived from market demand and an
assessment of the asset's development pipeline. The growth rates shown are the
average applied to the cash flows of the individual CGUs and do not form a
basis for estimating the consolidated profits of the Group in the future.
The discount rate used to test the cash-generating units was the Group's
pre-tax WACC of 12.4% (FY22: 10%). The value in use calculations described
above indicate significant headroom and therefore do not give rise to
impairment concerns.
As a result of these tests no impairment was considered necessary.
11. Tangible assets
Furniture, fittings and equipment
Land and buildings £'000 Right-of-use assets
£'000 £'000 Total
£'000
Cost
At 1 June 2021 33 453 766 1,252
Additions - 432 - 432
At 31 May 2022 33 885 766 1,684
Additions - 60 - 60
Disposals - (106) - (106)
At 31 May 2023 33 839 766 1,638
Depreciation
As at 1 June 2021 17 152 328 497
Charge for period 4 151 153 308
At 31 May 2022 21 303 481 805
Charge for period 3 260 154 417
Eliminated on disposal - (83) - (83)
At 31 May 2023 24 480 635 1,140
Net book value
At 31 May 2022 12 582 285 879
At 31 May 2023 9 359 131 499
12. Leases
The Company leases office premises. Under IFRS 16 this lease has been
classified as a right-of-use asset. The lease liability is included within
tangible assets on the statement of financial position. There are no other
long-term leased assets.
Right-of-use assets Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Balance as at 1 June 285 438
Depreciation charge for year (154) (153)
Balance at 31 May 131 285
Lease liability
Maturity analysis - contractual discounted cash flows
Less than one year 140 180
One to five years - 140
Total lease liabilities at 31 May 140 320
Lease liabilities included in the statement of financial position:
Current 140 180
Non-current - 140
Right-of-use assets are included within tangible assets in the consolidated
statement of financial position.
Amounts recognised in the Consolidated income statement
The Consolidated income statement shows the following amounts relating to
leases:
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Interest paid on lease liability 10 17
Any expense for short-term and low value leases is not material and has not
been presented.
13. Analysis of net cash
Lease liabilities
Cash Bank loans £'000 Total
£'000 £'000 £'000
At 1 June 2021 922 (1,250) (475) (803)
Working capital movements (2,150) - - (2,150)
Income from share issue net of IPO costs 13,561 - - 13,561
Repayment of loans - 1,250 - 1,250
Payment of lease liabilities - - 155 155
At 31 May 2022 12,333 - (320) 12,013
Working capital movements (3,859) - - (3,859)
Payment of lease liabilities - - 180 180
At 31 May 2023 8,474 - (140) 8,334
14. Deferred tax
Deferred tax liabilities are analysed as follows.
Year to Year to
31 May 2023 31 May 2022
£'000 £'000
Accelerated capital allowances (92) (167)
Tax losses - 147
Total deferred tax liability (92) (20)
Changes during each year are as follows:
Accelerated capital allowances Tax losses Total
£'000 £'000 £'000
Balance at 1 June 2021 - - -
Tax (charge)/credit in respect of current year (167) 147 (20)
Balance at 31 May 2022 (167) 147 (20)
Tax credit in respect of current year 75 (147) (72)
Balance at 31 May 92 - (92)
15. Share-based payments
In the year ended 31 May 2023 the Group recognised total expenses of
£2,068,000 (FY22: £2,376,000) in respect of equity‑settled share-based
payment awards under IFRS 2 Share-based Payment.
Details of the maximum number of ordinary shares which may be issued in future
periods in respect of LTIP awards and RSAs outstanding at 31 May 2023 are
shown below:
LTIP RSAs
Number of shares Number
of shares
At 1 June 2022 2,443,643 3,517,342
Granted in the year - 511,564
Forfeited in the year (1,321,720) (821,241)
At 31 May 2023 1,121,923 3,207,665
Share awards granted in the year ended 31 May 2023 were limited to below Board
employees and structured as Restricted Share Awards whereby vesting is based
on continued service only. As such, the IFRS 2 Share-based Payment fair value
of each award granted was equal to the face value of awards. Details of the
awards granted are as follows:
RSAs RSAs
23 February 2023 23 February 2023
Awards 406,122 105,442
Vesting Tranched vesting Tranched vesting
Share price at grant date (pence) 31 31
Exercise price (pence) 0 0
Expected volatility n/a n/a
Expected life (years) c. 0.7, 1.7, 2.7 c. 0.3, 1.3, 2.3
Expected dividend yield 0% 0%
Risk-free interest rate n/a n/a
Fair value (pence) - holding period n/a n/a
Fair value (pence) - no holding period 31 31
The exercise price for all RSAs granted in the year was £nil.
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