REG - ActiveOps PLC - Results for the year ended 31 March 2023
04/07/2023 07:00
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RNS Number : 8209E ActiveOps PLC 04 July 2023
4 July 2023
ActiveOps Plc
("ActiveOps", the "Company, "the Group")
Results for the year ended 31 March 2023
ActiveOps plc (AIM: AOM), a leading provider of Management Process Automation
(MPA) software for running hybrid and global back-office operations, is
pleased to announce its unaudited results for the year ended 31 March 2023.
Financial Highlights:
Year ended 31 March 2023 2022 Change
Annual recurring revenue "ARR"(1) £22.6m £20.1m +13%
Revenue £25.5m £22.9m +11%
Software & Subscription revenue £22.1m £19.6m +13%
Training & implementation "T&I" revenue £3.4m £3.4m -
Gross margin 82% 81% +1ppt
Adjusted EBITDA(2) £0.7m £(0.3m)
Profit/(loss) before tax £(0.2)m £(2.6)m
Earnings/(loss) per share on continuing operations (0.70)p (3.83)p
Net cash and cash equivalents £15.4m £13.8m +12%
· ARR growth of 13% (11% constant currency) above prior year
· Total Revenue growth of 11% driven primarily by increased recurring SaaS
revenues
· Gross Margins remain healthy at 82%, (2022: 81%) supported by improved T&I
margins
· Adjusted EBITDA moves to profitability at £0.7m (2022 Loss: £0.3m), ahead of
management expectations, reflecting operational leverage in the business and
forex gain of £0.7m (FY22: £0.3m)
· Strong EBITDA cash conversion of 505% (2022: 673%) arising from
annual-in-advance billing
· Balance sheet remains strong with £15.4m cash (2022: £13.8m) being
approximately 26% of the Company's current market capitalisation and no debt
Operational Highlights
· Significant expansion of existing customer relationships resulting in Net
Revenue Retention (NRR) of 110% (2022: 102%)
· 20% increase in ARR from the ten largest customers. 60% of customers
globally increased ARR, including 28% who increased ARR by 20% or more
· Added new customers in each of our three regional business units
· Double digit SaaS revenue growth in each of our regional business units
· New CaseworkiQ product, launched in June 2022, in use by 7 of the 10 largest
existing customers, proving its ability to create new opportunities with
existing customers
· First enterprise customer using all three ActiveOps software products
(ControliQ, WorkiQ and CaseworkiQ), demonstrating considerable up-sell
opportunities within the existing customer base
· Currently developing a series of major software enhancements for release in
the current financial year utilising Artificial Intelligence (AI) and Machine
Learning (ML) to provide customers with new opportunities to optimise
operational performance
Outlook
· Trading in the first few months of the year in line with Board expectations,
driven by customer expansions and addition of two new customers with
significant expansion potential.
· Continued healthy sales pipeline and positive outlook.
Footnote to Financial highlights
The above non-GAAP measures are unaudited
(1) Annual Recurring Revenue
(2) Adjusted EBITDA is used by management to assess the trading performance of
the business. Defined as Operating loss (£0.217m) before depreciation &
amortisation (£1.035m), share-based payment charges (£0.027m) and includes
FX differences (Loss: £0.181m).
Richard Jeffery, Chief Executive Officer of ActiveOps plc, commented:
"This has been a year of significant progress for ActiveOps, in which we have
won new customers across all regions, grown our existing customer accounts,
and launched new products which materially expand our addressable market.
Importantly, we achieved this alongside accelerating our shift to positive
adjusted EBITDA, well ahead of the timeline initially set at the time of our
IPO.
Trading in the first few months of the year has been steady, driven by
expansions at existing accounts and the addition of two new customers with
significant expansion potential. The sales pipeline remains healthy and the
progression of sales opportunities is increasingly well supported by our
marketing efforts and the significant interest in the new software
capabilities we are releasing this year.
In the longer-term, the enhancements we are making in our offering in the
areas of Artificial Intelligence (AI) and Machine Learning (ML) are increasing
the value of our solutions to our customers. With an extensive customer base,
international footprint, and growing offering, we are excited by the long-term
potential for ActiveOps."
For more information, please contact:
ActiveOps Via Alma PR
Richard Jeffery, Chief Executive Officer www.activeops.com (http://www.activeops.com/)
Ken Smith, Chief Financial Officer
Investec Bank plc +44 (0)20 7597 5970
Corporate Broking & PLC Advisory
Patrick Robb / David Anderson
Alma PR + 44(0) 203 405 0205
Caroline Forde / Will Ellis Hancock
About ActiveOps
ActiveOps is a leader in Management Process Automation (MPA), providing a SaaS
platform to large enterprises with complex and often global back-offices. The
Group's software and embedded back-office operations management methodology
enables enterprises to adopt a data-driven, scientific approach to organising
work and managing capacity.
The Group's enterprise platform comprises its MPA software products
and AOM, the Group's operations methodology and framework for effective
back-office management. Together, this combination of software and embedded
methodology enables operations managers to balance the competing priorities of
meeting service and quality standards while improving productivity and
reducing cost.
As at 31 March 2023, the Group had 179 employees, serving its global customer
base of over 80 enterprise customers from offices in the UK, Ireland, USA,
Australia, India and South Africa. The Group's customers are predominantly in
the banking, insurance and business process outsourcing (BPO) sectors,
including Nationwide, TD Bank, Anthem Inc and DXC Technology.
CHAIr's Statement
Introduction
ActiveOps has once again delivered on, or beaten, the commitments laid out at
IPO, making steady progress across all areas of the Group in a more typical
year, one without the distractions of either an IPO or the management of the
COVID pandemic.
With double-digit SaaS revenue growth, a transition to adjusted EBITDA
profitability and exciting developments within our core product set, we are
firmly delivering on strategy and set to maintain our growth trajectory. While
cognisant of the wider macroeconomic environment, we look to the future with
confidence.
Financial Performance
Our revenue performance this year has been particularly pleasing, reaching the
milestone of £25m, the vast majority of which is recurring revenue. I am
pleased that all three regions have continued to perform well. EMEIA in
particular has delivered a strong sales year, whilst growth was good in both
APAC and North America.
The continued improvements in running the business, ranging from the stability
of operations, approaches to governance and global finance systems
transformation, completed in recent years, have streamlined our approach to
running our own back office and a well-managed cost base. This, helped by a
positive foreign exchange contribution, has led to profitability and cash
generation ahead of our initial expectations. Achieving full year EBITDA
profitability reflects the hard work that has been completed by our team. This
EBITDA profit coupled with a year-end cash position of £15.4m demonstrates
the very firm foundations upon which this business stands.
Overview of the year
The solid ARR growth we have achieved has been delivered by signing new
customers and expanding existing customer revenues through continued user
growth and up-sell of additional products. This gives us optimism for the
coming year and stands us in good stead as we have moved into positive EBITDA.
The investments made into the development of the CaseworkiQ product are
delivering results, whilst significant excitement is being generated amongst
customers and prospects by our release, later this year, of AI-based
enhancements to ControliQ. We anticipate that we will maintain our current
levels of product investment, proportionate to revenue.
The investment in our marketing function, including the appointment of an
experienced CMO has led to record attendance by customers at our conferences,
which continue to drive excellent levels of customer engagement. The feedback
we receive from these events is fed back to our product teams, to help guide
our product roadmap. Our new quarterly OpsTracker report has been very
well-received, reflecting the unique level of insight it delivers to
Operations executives worldwide. There is no doubt that executives managing
complex back offices are under greater pressure to deliver ever higher
standards which increases the need for operations management excellence. The
ActiveOps suite of products is designed to meet these challenges and produce a
demonstrable return for our customers.
Governance / Diversity / ESG
ActiveOps has always been proud to be a diverse, global business with a sound
governance structures in place. Since our IPO in March 2021 we have adopted
a more structured approach to managing and developing our ESG agenda with the
implementation of a formal framework, and ongoing work to embed appropriate
policies and practices across the ESG framework into the business.
We use the Global Reporting Initiative ("GRI") framework to monitor our impact
on the environment, the satisfaction, equality and diversity of our staff as
well as a clearly-defined and strong corporate governance foundation, based on
the Quoted Companies Alliance ("QCA") code.
Our environmental impact remains small, with data centres and travel remaining
as the two main contributors to our carbon footprint. We aim to ensure that
the Group can grow sustainably, while minimising the environmental impacts of
not just our products, but also in how we operate as a business. We intend
to set carbon emissions reduction targets next year, once we have greater data
available to us in order to do so in a meaningful manner.
The success of our business is founded in our people and our culture, and we
are committed to fostering an environment of diversity and inclusion.
Following the success of the annual employee engagement survey that was
conducted in FY22 with an overall engagement score of 4.0 out of 5.0, the
business conducted a Culture and Diversity and Inclusion survey in FY23 with a
response rate of 79% and an overall engagement score of 72% across the
business with a breakdown by age, gender and ethnicity. This has created an
improved understanding across the business's different demographics which we
can use as a basis for decision-making and helping improve the lives of our
employees.
The strong corporate governance foundation we have is hugely important and
underpins everything we do from the Board down to our most junior employees.
Through the QCA code we have a clearly-defined framework for governing the
business that ensures any activity across the Group is done to ensure the
betterment of others, whether that be customers, colleagues or charitable
partners. This year I am delighted to report on the successful completion of
our SOC 2 compliance audit, which only further underscores our commitment to
transparency and accountability.
Looking Ahead
My fellow Directors and I feel very positive about the year ahead. After two
years of solid progress following our IPO, our focus remains on the continued
delivery of our plan, and there remains significant opportunity within our
well-defined target market. Whilst Covid-19 has ceased to be a distraction
for our customers, the increased appreciation of the need to run data-driven
operations is driving greater market interest.
We have an excellent base of customers, many of whom are passionate advocates
of the benefits that our products deliver. We continue to add new customers
with whom we are developing similarly strong relationships.
We have an experienced sales team, a very stable and effective product set,
and new offerings that are generating increased levels of interest. Our
customer care and marketing teams are working hard to extend our existing
relationships, to add new operations environments and drive additional product
usage. We have seen strong improvement in revenues from our existing customer
base supported by an account management approach that helps our customers get
the best from the products they have bought from us.
While we are aware of differing pressures in the wider economy, in our core
financial services sector we see the increased need for cost efficiencies,
greater governance and productivity, all representing opportunity for
ActiveOps and the products it provides. We believe we are well-placed to
further consolidate our position in the market and continue to deliver value
for our customers and shareholders.
I feel the Board formed at IPO has now established a very effective working
pattern between the Non-Executive Directors and the Executives of the firm. I
wish to particularly thank Hilary Wright and Mike McLaren for their excellent
leadership of the Remuneration and Audit committees, respectively. In
December 2022 we announced that Paddy Deller would be leaving his role as CFO
and in March 2023 we announced Ken Smith as his successor. We feel that
Ken's broad commercial experience, on top of his CFO skill, will be a real
benefit to the Board and the Company. I would like to sincerely acknowledge
Paddy's outstanding track record in the financial leadership of the Group
during his seven years as CFO. His dedication and commitment have supported
the Group's growth and smooth progression through major corporate events such
our IPO.
We will continue to excite and surprise our customers with the benefits we
deliver and the reliability of our software. Our go-to-market function will
continue to generate business in our target markets. This consistency of
strategy, coupled with our strong cash generation and balance sheet, means we
can approach the future with optimism.
Sean Finnan
Non-executive Chair
CEO Statement
This has been a year of significant progress for ActiveOps, in which we have
won new customers across all regions, grown our existing customer accounts,
and launched new products which materially expand our addressable market.
Importantly, we achieved this alongside accelerating our shift to positive
adjusted EBITDA, well ahead of the timeline initially set at IPO.
Our range of software offerings are powering demonstrable levels of return on
investment (ROI) for our customers, helping them create tangible efficiencies
across their back-office organisations, which in turn provides them with
improved resilience through challenging economic times. These ROI metrics
combined with the exciting roadmap of new functionality are driving revenue
expansion within our customers. We believe we are still very much at the
start of that journey.
The consistent rate of new wins we are achieving, the blue-chip nature of our
customers, and the stickiness of our software, means we have a
consistently-growing, valuable base of high-margin recurring revenue. This
provides us with the visibility to invest and remain at the forefront of the
growing workforce optimisation market and generate increasing levels of
profitability.
Strong financial performance
After another year in which we continued to win new customers and execute our
land and expand sales strategy, we achieved a near-record SaaS sales year,
with SaaS revenues growing by 13% to £22.1m (FY22: £19.6m), supported by a
13% increase in Annual Recurring Revenue (ARR) at March 2023 to £22.6m (March
2022: £20.1m).
The growth of overall Group revenue by 11% to £25.5m (FY22: £22.9m),
underpinned by very low levels of churn, demonstrates the underlying momentum
of the business as it continues to deliver its long-term growth ambitions.
This notably low churn rate, even by ActiveOps' strong track record of
customer retention, can be attributed to the excellent work being done by our
customer relationship managers. The Board is confident that the investments we
have made in this area of the business will continue to have a positive impact
on the overall performance of the Company. ARR from our ten largest
customers increased by more than 20%. Across the whole customer base more
than a quarter of our customer relationships increased ARR by 20% or more.
T&I revenues of £3.4m (FY22: £3.4m) were particularly strong in the
second half of the year, including a record T&I sale to one of our
longstanding customers, demonstrating the continued value this area of the
business provides. This aspect of our revenue continues to deliver strong
gross margin at 63% (FY22: 58%) and continues to be part of our growth
strategy as it ensures customers achieve their desired outcomes from deploying
our technology and provides opportunities to increase the value delivered over
the lifetime of the relationship.
Continuing our year-on-year growth in cash, the business remains well-funded
with a closing balance of £15.4m (2022: £13.8m) and no debt, providing a
strong base to fund future investment opportunities.
Evolving market opportunity
The current economic climate is creating a very positive environment for our
software and services. The practicalities of hybrid-working have seen
unprecedented levels of attention to managing productivity, the challenges of
managing workload and capacity, and the need for data to inform the operation
of complex business processes. The current challenging economic conditions
mean organisations are seeking to achieve more with their current or reduced
scale of operations, as well as respond quickly to unusual fluctuations in
customer demand and behaviour.
Our solutions have a demonstrable track record of delivering rapid,
sustainable performance improvements for our customers. Customers typically
achieve an initial productivity improvement of 15% or higher, which for an
enterprise with 20,000 staff in back-office roles, represents creation of
capacity equivalent to 2,600 full-time equivalent (FTE) staff members. Our
software also increases agility and resilience of our customers' operations.
These capabilities are crucial in the maintenance of exceptional customer
service during turbulent periods.
Unlike many of the initiatives that organisations can undertake to increase
efficiency and release capacity, deployment of ActiveOps solutions is quick
and low-risk as it does not require modification of existing business
processes or major technology change. Adoption rates of Management Process
Automation technology continue to be relatively low in operations today,
meaning many organisations still have this rapid and safe means of efficiency
gains available to them.
Awareness of the potential efficiency gains from the implementation of AI is
growing and it is a technology we have already been able to successfully
incorporate within our product set. Once implemented, our solutions ensure a
customer's vast wealth of operations data becomes not only visible, but
structured, ready for the application of AI tools either from within our own
solutions, or available to other AI applications, underscoring the market
leading position of our technologies.
Further to this, the current year will see the launch of our first two Machine
Learning (ML) powered capabilities, Smart Planning and Smart Skills, made
possible by the wealth of data captured within our systems and our Knowledge
Transfer Partnership with Henley Business School. Prototypes of both have
been tested with existing customers, which confirms the ability of these
features to support further improvements in performance. The incorporation of
AI and ML technologies within our technology demonstrates both the skill of
our product team and our commitment to innovation and how this materially
benefits our customers.
Our experience during the last economic downturn was that demand for our
offering increased significantly as organisations sought solutions which
offered rapid and sustainable performance improvements. From January 2008
through to December 2010 the number of paying users of our software grew
sixfold as we signed major new customers in both APAC and EMEIA and landed our
first North American customers, which have now expanded to be enterprise scale
users.
While we know that our offering resonates in turbulent times, we are also
aware of the impact an economic downturn might have on the buying processes of
our customers, which will likely become more protracted. However, based on our
historical performance, the proven track record of our offering and the
growing interest we are seeing across our products, we firmly believe our
solutions will play an integral role in helping new and existing customers
deal with the challenges posed by an economic downturn.
Software development and innovation
The development of our product offering has continued in line with our stated
product road map. The innovations we have made across the product suite will
provide customers with increasingly sophisticated tools and cutting-edge
technologies. These make managing the growing complexity of the back-office
easier, and further differentiate us from our competitors.
As a technology-led organisation we strive, with every improvement we make to
our software, to enable our customers to do more with less. The incremental
additions made this year were designed to create a stickier, smarter and more
intelligent platform, that exposes the value of our data to our customers, in
a more accessible and valuable way.
Reflecting the broader market interest in managing work and capacity, we are
seeing greater levels of senior manager engagement in the roadmap across our
new and existing customer base. This heightened interest in the products we
are developing is testament to the work of our development teams, and the
strong relationships that have been built between our customers and
relationship managers.
ControliQ
As stated in our product roadmap the team has been focused on delivering our
latest enhancement, Smart Planning, which will be made available to ControliQ
customers in the second quarter of FY24.
Smart Planning, the first of several Machine Learning (ML) powered
capabilities, eliminates the time and thought required by team leaders to
build their plans, and increases the accuracy of the plans produced. This
leads to further increases in team performance and greater release of team
leader time for value adding activities.
Smart Planning will be quickly followed by Smart Skills, a product that will
allow for the automatic determination of available skill levels across the
back office. This will make it simple to identify training requirements and
utilise shared skills across departments. Prototypes of both have been tested
with existing customers with positive results. A focus for the first part of
the new financial year is making these features ready for go-live.
CaseWorkiQ
Following the successful launch of CaseworkiQ in the first half of the year,
we are delighted that 7 of our top 10 customers are now using the product,
with a total of 12 customers using or trialling the solution to date.
CaseworkiQ already contributed 4% of 31 March 2023 ARR with a growing pipeline
of future opportunities.
This year, we also began the process of improving integration between
CaseworkiQ and ControliQ which will make it easier for customers to manage
operations which are a mixture of transactional and case-based work. This
integration will be completed early in the current financial year and gives us
the opportunity to accelerate upgrades to the platform in the future.
WorkiQ
This year we commenced development of a cloud-based version of WorkiQ to offer
an alternative to the existing on-premise solution which will enable more
rapid roll-out, lower cost of ownership and support future integration with
other ActiveOps products. The new version will be available to customers
in the second half of FY24 and we anticipate it will encourage more ControliQ
customers to adopt WorkiQ to take advantage of the additional insight it
provides.
Growth of our customer base: land & expand
Our customer acquisition activity is focused on a tightly defined set of
banks, insurers and BPOs in our target geographies, representing a significant
Annual Recurring Revenue (ARR) opportunity. The opportunity for ActiveOps
continues to be large due to the scale of operations in these target markets,
and we continue to see demand for our products reflected in our growing annual
revenue performance.
We made solid progress in the year, securing new logo wins and significant
expansion sales across all target regions and sectors, in line with our land
and expand growth strategy. We secured six new logo accounts, including two
major financial services organisations with significant opportunity for future
growth. We have also achieved significant new product upsells in the year.
A top 10 existing banking customer and ControliQ user since 2019 added WorkiQ
in FY22 and CaseworkiQ this year. This is a primary example of the significant
up-sell opportunity offered by our expanded product set.
We were delighted to secure a 3-year combined ControliQ and CaseworkiQ
contract win with a major investment management firm, which will lead to both
products being rolled out across the customer's operations in the UK, India
and Germany, to increase efficiencies and improve employee and customer
experience, by growing the capacity of skilled team members on a global scale.
We saw strong profitable performance across all regions, with double digit
growth in SaaS revenues in each.
Sales and Marketing
Our marketing function has developed significantly since Bhavesh Vaghela's
appointment as CMO in the first half of the year. The marketing team has been
working hard on various projects to raise brand awareness and generate sales
leads. Our annual customer conferences held in London and Melbourne were a
particular success, attracting record audiences and fantastic engagement
between customers, partners and the ActiveOps team. The positive impact of
the conferences on deal progression was felt in the second half of the year.
This year, our partnership with Microsoft took another step forwards as
ActiveOps was named as one of its top-10 independent software vendors (ISVs)
in the UK. This close working relationship has accelerated numerous sales
discussions and is creating a growing pipeline of new opportunities.
This year saw the launch of OpsTracker, a quarterly report which utilises the
benchmarking data drawn from our anonymised customer data to highlight trends
in the performance of operations around the world. This builds on the
successful OpsIndex capability which allows our customers to compare their
performance against their industry peers. OpsTracker highlights the data and
metrics which organisations who do not use ActiveOps solutions are unable to
access and the consequent potential to improve business outcomes through
optimising operations performance. The OpsTracker reports provide powerful
marketing content which we are distributing globally through digital marketing
campaigns, helping to grow our sales pipeline, while reinforcing our thought
leadership position in our industry.
Focus for the year ahead
Looking to the year ahead, the business has a well-defined and resourced set
of priorities to maintain the excellent progress of last year.
We will be continuing our improvement in profitability by maintaining strong
control over operating costs and allowing the gross margin on new sales to
flow to the bottom line.
We will be focusing on expanding the products used by our existing customers
and releasing a steady stream of enhancements, further improving ROI for our
customers and the range of issues our software resolves, to increase total
revenue and profit for the Group.
We will be capitalising on our investment in marketing to drive new customer
acquisition and secure expansion opportunities for the coming years.
Confident Outlook
Trading in the first few months of the year has been in line with the Board's
expectations, driven by expansions at existing accounts and the addition of
two new customers with significant expansion potential.
Our marketing efforts and the significant interest in the new software
capabilities we are releasing this year continue to support the sales
pipeline, which remains healthy. This, combined with our proven ability to
efficiently invest in the business and grow bottom line profits, provides the
Board with confidence in the year ahead.
In the longer-term, the enhancements we are making in our offering in the
areas of Artificial Intelligence (AI) and Machine Learning (ML) are increasing
the value of our solutions to our customers.
With an extensive customer base, global footprint and an ever expanding
offering of cutting edge products, we are excited by the long-term potential
for ActiveOps and look to the future with confidence.
Richard Jeffery
Group Chief Executive Officer
Chief Financial Officer's Report
I am pleased to report on a robust year for the group with 11% organic revenue
growth to £25.5m. With incremental investment lower than in the prior year,
the Group is beginning to benefit from the operational leverage in the
business model, delivering a positive Adjusted EBITDA for the year.
Annual Recurring Revenue
Annual Recurring Revenue of £22.6m at 31 March 2023 has grown 13% versus the
prior year (31 March 2022 £20.1m) as a result of sales to existing customers,
and the addition of 6 new customers generating ARR of £0.6m at the year end,
with the opportunity to contribute further in FY24. NRR of existing
customers improved to 110% (FY22: 102%) with customer logo churn increasing
slightly to 5.2% (FY22: 3.8%).
Revenue
Total revenue at £25.5m was 11% ahead of prior year (8% ahead on constant
currency), with software and subscription revenues increasing 13% to £22.1m
(FY22: £19.6m) arising from both new and existing customers. Revenue growth
was strong in all regions with EMEIA growing Total Revenues by 12% to £14.0m
(FY22: £12.5m), North America by 11% to £6.0m (FY22: £5.4m) and Asia
Pacific by 9% to £5.5m (FY22: £5.0m).
Training and Implementation (T&I) revenues have remained flat at £3.4m
(FY22: £3.4m) with a significant refresh programme at a major customer
demonstrating ongoing customer commitment to keeping their teams' skills
refreshed. T&I revenues continue to vary by product and region depending
on the mix of customer implementation requirements as well as the timing of
implementations dictated by customer plans. T&I revenues in the second
half of the year performed strongly following a slow start to the year.
Margins and Operating Profit
Gross margins at 82% (FY22: 81%) have improved marginally primarily due to a
higher mix of SaaS revenues versus prior year. SaaS revenue margins have been
maintained at 85% (FY22: 85%). Margins for T&I revenues have improved to
63% (FY22: 58%), due to strong T&I sales in high margin jurisdictions and
for high margin products.
Operating expenses (excluding share-based payments, depreciation, amortisation
and exceptional items) increased to £19.9m (FY22: £19.0m) following our
increased investment in people in the previous year adding a full year of
cost. Whilst investment will continue to support growth, the rate of
required investment has slowed versus prior years and the business has started
to see the benefits of the operational leverage inherent in the business
model. The North America region has seen a reduction in operating costs
following a move to a more focussed, Enterprise customer strategy. The Group
has also benefitted from positive movements on foreign exchange balances held
in the company's bank accounts and other balance sheet items which has
benefitted operating costs by £0.7m (FY22: £0.3m) in the year.
Following the expansion of the Group's R&D capabilities in prior years,
the team has focussed on enhancing ControliQ and CaseworkiQ, adding new
features which exploit AI and Machine Learning technology. The Group
capitalised internal labour of £0.9m (FY22: £0.4m).
Continued investment in account management and further investment in
Marketing, with the addition of a Chief Marketing Officer to the management
team is expected to develop a value-based customer proposition. This,
coupled with a focussed project to revise the tiering of current and future
features within the licensing structure, is expected to deliver increased ARR
in the current financial year and beyond.
Travel costs broadly returned to pre-pandemic levels with wage inflation
managed to circa 5% in an unusually high inflationary environment. ActiveOps
is committed to ensuring that it supports employees appropriately through the
current cost of living crisis and will take action where necessary to support
individuals.
Adjusted EBITDA moved to a profitable position of £0.7m (FY22: loss £0.3m)
excluding the costs associated with share-based payments at £0.0m (FY22:
£0.6m), translation reserve loss of (£0.2m) (FY22: gain £0.2) and M&A
activities which were zero in the year (FY22: £0.5m).
Year ended 31 March 2023 Year ended 31 March 2022
SaaS T&I Total SaaS T&I Total
£000 £000 £000 £000 £000 £000
Revenue 22,058 3,401 25,459 19,564 3,353 22,917
Cost of Sales (3,411) (1,268) (4,679) (2,974) (1,423) (4,397)
Gross Margin 18,647 2,133 20,780 16,590 1,930 18,520
Product and Technology Expenditure
Total expenditure on product management, research, development and support in
the year increased to £5.4m (FY22: £4.6m) excluding capitalisation of
labour, following investment in all areas in the prior year, with a full year
of costs now recognised. This investment has enabled the group to deliver
several new features to the product set to provide additional benefit to
customers. R&D costs of £0.9m (FY22: £0.4m) were capitalised during
the year relating to new features incorporated into ControliQ and CaseworkiQ.
Exceptional Items & Long-Term Incentive Plan (LTIP) charges
During the year the income statement charge for the LTIP incentives issued at
IPO and in July 2022 was £0.03m (FY22: £0.6m). Costs associated with the IPO
grant of £0.4m were reversed given that financial and share price targets
associated with the grant are unlikely to be met. There was also a reversal
of the charge related to options that were granted to individuals who have
subsequently left the company of £0.1m. There were no exceptional charges in
the year (FY22: £0.5m relating to acquisition that did not complete).
Foreign Exchange
The Group has 48% (2022: 49%) of revenues invoiced in currencies other than
GBP, with the Group's cost base predominantly located in the same base
jurisdictions as revenues, providing a natural hedge to currency exchange
risk. Movements on exchange rates throughout the year represent a positive
movement of £0.8m relating to revenue, an adverse impact of £0.7m relating
to operating costs and a positive impact of £0.7m relating to the translation
of foreign currencies held in bank accounts.
Depreciation and Amortisation
Depreciation and amortisation of £1.0m (FY22: £1.0m) principally comprised
intangible amortisation following the acquisition of the OpenConnect entity in
2019 and the Australian entities in 2017.
Taxation
The Group had a tax charge in the year of £0.3m (FY22: £0.1m). The Group
operates a transfer pricing policy to ensure that profits are correctly
recorded in each of the jurisdictions in which it operates. ActiveOps has
brought forward tax losses in the UK and Irish legal entities that currently
reduce the overall tax rate of the business.
Statutory Results
The Group reported a loss of £0.7m (FY22: loss £2.6m) for the year.
Earnings per Share
Following the Group's move to adjusted EBITDA profitability, the loss
attributable to equity shareholders basic earnings per share for continuing
operations was a loss of 0.70p (FY22: loss (3.83p))
Dividend
The Board has determined that no dividend will be paid in the year. The Group
is primarily seeking to achieve capital growth for shareholders at this time.
It is the Board's intention during the current phase of the Group's
development to retain distributable profits from the business to the extent
they are generated.
Balance Sheet
The Group has a strong balance sheet position with no debt and net assets at
31 March 2023 of £7.9m (FY22: £8.5m) including cash of £15.4m at the end of
the year (March 2022 : £13.8m).
Goodwill and intangible assets
The carrying value of the Group's goodwill of £1.2m (FY22: £1.2m) was
reviewed by the Board with no indications of impairment. The intangible assets
at £4.5m (FY22: £4.3m) arising from business combinations for customer
relationships, purchased software and capitalised development costs are
amortised over an appropriate period.
Cash flow
The Group continues to generate positive working capital with the ratio of
operating cashflow to EBITDA at 505% for the year (FY22: 673%).
The Group continued to bill most customers annually in advance for software
revenues with deferred income increasing to £13.5m (2022: £8.3m). The
seasonality of existing contract customer renewals in the second half of the
year delivered a strong increase in cash over that period.
Ken Smith
Chief Financial Officer
Consolidated statement of profit and loss and other comprehensive income for
the year ended 31 March 2023
2023 2022
Year ended 31 March Notes £000 £000
Revenue 3 25,459 22,917
Cost of sales 4 (4,679) (4,397)
Gross profit 20,780 18,520
Administrative expense excluding share option charges, depreciation, (19,935) (18,959)
amortisation and exceptional items
Administrative expenses - share option charges only (27) (563)
Administrative expenses - depreciation and amortisation only 7-9 (1,035) (1,009)
Administrative expenses - exceptional items only 5 - (539)
Operating loss (217) (2,550)
Finance income 49 3
Financing cost (62) (65)
Loss before taxation (230) (2,612)
Taxation 6 (267) (119)
Loss for the year (497) (2,731)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations (181) 161
Total comprehensive loss for the year attributable to the owners of the parent (678) (2,570)
company
Basic and diluted loss per share
Continuing operations (0.70p) (3.83p)
Total (0.70p) (3.83p)
ActiveOps plc
Consolidated statement of financial position
2023 2022
At 31 March Notes £000 £000
Non-current assets
Intangible assets 7 5,735 5,461
Property, plant and equipment 8 162 199
Right of use assets 9 419 564
Deferred tax assets 217 270
Total non-current assets 6,533 6,494
Current assets
Trade and other receivables 10 6,373 3,754
Corporation tax recoverable - -
Cash and cash equivalents 15,377 13,753
Total current assets 21,750 17,507
Total assets 28,283 24,001
Equity
Share capital 71 71
Share premium account 6,444 6,444
Share option reserve 593 566
Foreign exchange reserve (224) (43)
Retained earnings 983 1,480
Total equity 7,867 8,518
Non-Current liabilities
Lease liabilities 9 364 501
Provisions 102 97
Deferred tax liabilities 889 1,049
Total non-current liabilities 1,355 1,647
Current liabilities
Trade and other payables 11 18,860 13,697
Lease liabilities 9 100 139
Corporation tax payable 101 -
Total current liabilities 19,061 13,836
Total equity and liabilities 28,283 24,001
ActiveOps plc
Consolidated statement of cash flows
2023 2022
Year ended 31 March Notes £000 £000
Loss after tax (497) (2,731)
Taxation 267 119
Finance income (49) (3)
Finance expense 62 65
Operating loss (217) (2,550)
Adjustments for:
Depreciation of property, plant and equipment 8 127 144
Depreciation of right of use asset 9 142 165
Amortisation of intangible assets 7 766 700
Share option charge 27 563
Change in trade and other receivables 10 (2,619) 2,082
Change in trade and other payables and provisions 11 5,168 (3,111)
Cash from / (used in) operations 3,394 (2,007)
Interest paid (62) (65)
Taxation paid (284) (184)
Net cash generated / (outflow) from operating activities 3,048 (2,256)
Investing activities
Purchase of property, plant and equipment 8 (90) (96)
Purchase of software 7 (891) (364)
Interest received 49 3
Net cash used in investing activities (932) (457)
Financing activities
Proceeds from issue of shares - (14)
Repayment of lease liabilities (173) (184)
Net cash used in financing activities (173) (198)
Net change in cash and cash equivalents 1,943 (2,911)
Cash and cash equivalents at beginning of the year 13,753 16,617
Effect of foreign exchange on cash and cash equivalents (319) 47
Cash and cash equivalents at end of the year 15,377 13,753
ActiveOps plc
Consolidated statement of changes in equity
Share capital Share premium Share option reserve Foreign exchange reserve Retained earnings Total
Year ended 31 March £000 £000 £000 £000 £000 £000
At 1 April 2021 71 6,430 4 (204) 4,210 10,511
Loss for the year - - - - (2,731) (2,731)
Exchange differences on translating foreign operations - - - 161 - 161
Total comprehensive loss for the year - - - 161 (2,731) (2,570)
Transactions with owners, recorded directly in equity
Reserve transfer on exercising of share options - - (1) - 1 -
Share based payment charge (note 21) - - 563 - - 563
Issue of shares - 14 - - - 14
Total transactions with owners - 14 562 - 1 577
At 31 March 2022 71 6,444 566 (43) 1,480 8,518
Share capital Share premium Share option reserve Foreign exchange reserve Retained earnings Total
Year ended 31 March £000 £000 £000 £000 £000 £000
At 1 April 2022 71 6,444 566 (43) 1,480 8,518
Loss for the year - - - - (497) (497)
Exchange differences on translating foreign operations - - - (181) - (181)
Total comprehensive profit for the year - - - (181) (497) (678)
Transactions with owners, recorded directly in equity
Reserve transfer on exercising of share options - - - - - -
Share based payment charge (note 21) - - 27 - - 27
Issue of shares - - - - - -
Total transactions with owners - - 27 - - 27
At 31 March 2023 71 6,444 593 (224) 983 7,867
Notes forming part of the financial statements
for the year ended 31 March 2023
1. General information
ActiveOps plc (the 'Company') is a public company limited by shares
incorporated in England and Wales. The registered office and principal place
of business is One Valpy, 20 Valpy Street, Reading, Berkshire, RG1 1AR. On the
17 March 2021 the company became a public limited company, having formerly
been known as ActiveOps Ltd.
The Company, together with its subsidiary undertakings (the 'Group') is
principally engaged in the provision of hosted operations management Software
as a Service ('SaaS') solutions to industry leading companies around the
world.
The preliminary financial information presented in this report is unaudited
and has been prepared in accordance with the recognition and measurement
principles of International Accounting Standards in conformity with the
requirements of the Companies Act 2006 set out in the Group accounts for the
years ended 31 March 2022 and 31 March 2023, and does not contain all the
information to be disclosed in financial statements prepared in accordance
with IFRS.
The figures for the year ended and as at 31 March 2023 are unaudited. The
figures relating to 31 March 2022 have been extracted from the statutory
accounts for that year. The statutory accounts for the year ended 31 March
2023 have yet to be delivered to the Registrar of Companies and have been
prepared in accordance with UK-adopted International Accounting Standards. The
preliminary financial information does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006, and does not
contain all the information required to be disclosed in a full set of IFRS
financial statements.
Statutory accounts for the year ended 31 March 2023 will be delivered to the
Registrar of Companies and sent to Shareholders in due course. Statutory
accounts for the year ended 31 March 2022 have been filed with the Registrar
of Companies. The auditor's report on those accounts was unqualified and did
not include reference to any matters to which the auditor drew attention by
way of emphasis without qualifying the report and did not contain a statement
under section 498(2) and (3) of the Companies Act 2006
2. Accounting policies
a) Basis of preparation
The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated.
The financial statements of the Group have been prepared on a going concern
basis and in accordance with UK-adopted International Accounting Standards.
The preparation of financial statements in compliance with IFRS requires the
use of certain critical accounting estimates. It also requires Group
management to exercise judgment in applying the Group's accounting policies.
b) Going Concern
The Directors have a reasonable expectation that there are no material
uncertainties that cast significant doubt about the Group's ability to
continue in operation and meet its liabilities as they fall due for the
foreseeable future, being a period of at least 12 months from the date of
approval of the financial statements.
Whilst there can be no certainty due to the conditions across the world at
present, the Directors have reviewed cash flow forecasts for the business
covering a period of at least 12 months from the date of approval of the
financial statements, and together with the projected revenue and available
cash reserves, they are confident that sufficient funding is available to
support ongoing trading activity and investment plans for the business. The
financial statements have therefore been prepared on a going concern basis.
c) New accounting standards and interpretations not yet
mandatory or early adopted
Accounting Standards that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting
period ended 31 March 2023. The assessment of the impact of these new or
amended accounting standards and interpretations is ongoing.
d) Revenue
The Group's revenues consist primarily of SaaS solutions and Training and
Implementation revenues ('T&I').
SaaS solutions are sold as both a cloud IT environment or as an on-premise
solution which can be hosted within a customer's server. Alongside the
software, the Group provides ongoing management services contracts which
involves ongoing support of the software. This support is typically achieved
by accessing the software to ensure it is operating efficiently and to make
changes as requested by the customer. The licence and associated management
services contract are considered to be a single performance obligation because
although the customer obtains possession of the software, they are unable to
benefit from the software solution without the associated management services.
T&I relates to implementation of the SaaS solution and training in the
Group's methodology on how to use the solution to the best effect. This is
typically delivered at the start of a new customer relationship, or when a
customer expands the use of the Group's software into other parts of their
business. Ad-hoc training is also provided to existing customers. T&I is a
single performance obligation.
Both SaaS performance obligations are provided under fixed-price contracts,
which is mainly contracted as a fixed price for a period of time for up to a
contractual number of users, but also can be achieved via a price per user,
where the number of actual users is determined in arrears. SaaS contracts are
typically for a period of one year. Where the number of users is determined in
arrears, a best estimate of the expected revenue is accrued each month based
upon recent usage.
SaaS solutions, both hosted and on-premise, are recognised on a straight-line
basis over the length of the contract during which the customer has daily
access to these services.
T&I services are recognised over time based upon the delivery of the
service. Variable and contingent consideration exists in T&I revenues for
some customers typically dependent on the customer achieving a level of
efficiency due to the purchase of the Group's software and methods. Management
agrees with the customer the expected amount of productivity gain and the
associated contingent revenue with the customer at the outset of the contract,
based upon an initial health check of the customers operations. Management
considers the likelihood of the efficiency being achieved given what is
discovered in the initial health check and past performance of the Group's
products with other customers, and if the gain is considered to be probable
the variable revenue is recognised alongside the non-variable T&I revenue.
If the gain is not initially thought to be probable, then the revenue is only
recognised once the efficiency improvements demonstrate that the targets are
likely to be achieved. At present this isn't a significant judgement as it
applies to a relatively small amount of revenues and the efficiency targets
have, historically, been achieved.
Revenue has been allocated between performance obligations using stand-alone
selling prices. Most sales are only for one performance obligation, as
customers who remain with the Group over many years do not usually require
additional T&I. Equally T&I is sold at daily rates that are comparable
to third party training providers who run management courses or similar for
organisations that are comparable to the broad customer base of the Group. Any
non-trivial variation from the total cost of a sale of both performance
obligations when compared to standalone prices and external providers prices
are applied on a pro rata basis to the agreed sales price with the customer to
determine the split between the two performance obligations.
The IFRS 15 practical expedient that an entity need not adjust the promised
amount of consideration for the effects of a significant financing component
if the entity expects, at contract inception, that the period between when the
entity transfers a promised good or service to a customer and when the
customer pays for that good or service will be one year or less has been
applied. That an entity may recognise the incremental costs of obtaining a
contract as an expense when incurred if the amortisation period of the asset
that the entity otherwise would have recognised is one year or less has also
been applied.
No financing cost has been considered to be part of the revenue due to the
duration of the performance obligations lasting for one year or less. Warranty
fixes are provided as required within the agreed services of the SaaS
solutions performance obligations. These are assurance-type warranties (i.e. a
product guarantee) and so are not separate performance obligations.
In the case of fixed-price contracts, the customer pays the fixed amount based
on a payment schedule. If the services rendered by the Group exceed the
payment, a contract asset is recognised. If the payments exceed the services
rendered, a contract liability is recognised. Contract assets and liabilities
are recognised within 'prepayments and accrued income' and 'accruals and
deferred income' respectively.
e) Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls a group
when it is exposed to, 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. In assessing control, the Group takes into
consideration potential voting rights. The acquisition date is the date on
which control is transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases.
Intra-Group balances and transactions, and any unrealised income and expenses
arising from intra-Group transactions, are eliminated. Unrealised gains
arising from transactions with equity-accounted investees are eliminated
against the investment to the extent of the Group's interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
f) Foreign currency
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at the foreign exchange rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are retranslated to the functional
currency at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the Statement of
Comprehensive Income. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value
are retranslated to the functional currency at foreign exchange rates ruling
at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to the Group's
presentational currency, sterling, at foreign exchange rates ruling at the
balance sheet date. The revenues and expenses of foreign operations are
translated at an average rate for the period where this rate approximates to
the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive income and accumulated in the
translation reserve or non-controlling interest, as the case may be. When a
foreign operation is disposed of, such that control, joint control or
significant influence (as the case may be) is lost, the entire accumulated
amount in the translation reserve, net of amounts previously attributed to
non-controlling interests, is recycled to the Statement of Comprehensive
Income as part of the gain or loss on disposal.
g) Classification of instruments issued by the Group
Instruments issued by the Group are treated as equity (i.e., forming part of
shareholders' funds) only to the extent that they meet the following two
conditions:
• They include no contractual obligations upon the
Group to deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions that are
potentially unfavourable to the Group; and
• Where the instrument will or may be settled in the
Company's own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own equity
instruments or is a derivative that will be settled by the Company exchanging
a fixed amount of cash or other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the items are classified as a
financial liability.
Finance payments associated with financial liabilities are dealt with as part
of finance expenses. Finance payments associated with financial instruments
that are classified in equity are dividends and are recorded directly in
equity.
Where a financial instrument that contains both equity and financial liability
components exists these components are separated and accounted for
individually under the above policy.
h) Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
A. Financial Assets
Classification and initial measurement of financial assets:
Financial assets, other than those designated and effective as hedging
instruments, are classified into the following categories:
• Amortised cost
• Fair value through profit or loss ('FVTPL')
• Fair value through other comprehensive income
('FVOCI').
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within other expenses.
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
• They are held within a business model whose
objective is to hold the financial assets and collect its contractual cash
flows.
• The contractual terms of the financial assets give
rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments.
Impairment of financial assets
IFRS 9's impairment requirements use forward-looking information to recognise
expected credit losses - the 'expected credit loss (ECL) model'.
The Group considers a broader range of information when assessing credit risk
and measuring expected credit losses, including past events, current
conditions, and reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated
significantly in credit quality since initial recognition or that have low
credit risk ('Stage 1'); and
• financial instruments that have deteriorated
significantly in credit quality since initial recognition and whose credit
risk is not low ('Stage 2').
• 'Stage 3' would cover financial assets that have
objective evidence of impairment at the reporting date.
'12-month expected credit losses' are recognised for the first category while
'lifetime expected credit losses' are recognised for the second category.
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit losses over the expected life of the
financial instrument.
Trade and other receivables
The Group makes use of a simplified approach in accounting for trade and other
receivables and records the loss allowance as lifetime expected credit losses.
These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial
instrument. In calculating, the Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit
losses.
The Group does not have a history of material credit losses on its trade
receivables and no change to this is expected when considering forward looking
information.
B. Financial Liabilities
Classification and measurement of financial liabilities
The Group's financial liabilities include trade payables and other payables.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method.
All interest-related charges and, if applicable, changes in an instrument's
fair value that are reported in profit or loss are included within finance
costs or finance income.
i) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to administrative expenses in the Statement of
Comprehensive Income. The principal annual rates used for this purpose are:
• Leasehold improvements - straight line over 3
years.
• Plant and machinery - straight line over 3 years.
• Furniture, fittings and equipment - straight line
over 5 years.
• Right of use assets - straight line over the
earlier of useful life of the right of use asset or the lease term.
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
j) Leases
The Group has applied IFRS 16 throughout the financial statements. At
inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
The Group recognises a Right of Use (ROU) asset and a lease liability at the
lease commencement date. The ROU asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to restore the underlying asset, less
any lease incentives received.
The ROU 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 ROU
asset or the end of the lease term. In addition, the ROU asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liabilities. Depreciation is charged to administrative expenses
in the Statement of Comprehensive Income.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. The Group uses its
incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed payments, including in-substance fixed
payments.
• Variable lease payments that depend on an index or
a rate, initially measured using the index or rate as at the commencement
date.
• Amounts expected to be payable under a residual
value guarantee; and
• The exercise price under a purchase option that
the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value guarantee
or if the Group changes its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the ROU asset or is recorded in profit or
loss if the carrying value of the ROU asset has been reduced to zero.
The Group presents ROU assets and lease liabilities separately from property,
plant and equipment.
Short term leases and low value assets
The Group has elected not to recognise ROU assets and lease liabilities for
short-term leases of machinery that have a lease term of 12 months or less and
leases of low-value assets, including IT equipment. The Group recognises the
lease payments associated with these leases as an expense on a straight-line
basis over the lease term. There are several property leases in the Group on a
one-month rolling contract. These are treated as short-life assets and are
recognised on a straight-line basis.
k) Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units ('CGU') and is not amortised but is tested
annually for impairment.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the
Statement of Comprehensive Income as an expense as incurred.
Other intangible assets that are acquired by the group are stated at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation is charged to the administrative expenses in the Statement of
Comprehensive Income on a straight-line basis over the estimated useful lives
of intangible assets unless such lives are indefinite. Intangible assets with
an indefinite useful life and goodwill are systematically tested for
impairment at each balance sheet date. The Group has no assets with indefinite
lives, other than Goodwill, throughout the reporting periods.
Other intangible assets are amortised from the date they are available for
use. The estimated useful lives are as follows:
• Customer relationships - 10 years straight line.
• Purchased software - 3 years straight line.
• Intellectual property rights acquired on
acquisition - 3 years straight line.
• Development costs - 5 years straight line.
The estimated useful lives are as estimated based upon management's best
estimate of the expected life of the asset. Useful lives are reconsidered if
circumstances relating to the asset change or if there is an indication that
the initial estimate requires revision.
l) Impairment
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed
at each reporting date to determine whether there is objective evidence that
it is impaired. A financial asset is impaired if objective evidence indicates
that a loss event has occurred after the initial recognition of the asset, and
that the loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows discounted at the asset's original
effective interest rate. Interest on the impaired asset continues to be
recognised through the unwinding of the discount. When a subsequent event
causes the amount of impairment loss to decrease, the decrease in impairment
loss is reversed through the Statement of Comprehensive Income.
Non-financial assets
The carrying amounts of the Group's non-financial assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the asset's recoverable amount is estimated.
For goodwill, and intangible assets that have indefinite useful lives or that
are not yet available for use, the recoverable amount is estimated each year
at the same time.
The recoverable amount of an asset is the greater of its value in use and its
fair value less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the
risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets.
An impairment loss is recognised if the carrying amount of an asset exceeds
its estimated recoverable amount. Impairment losses are recognised in the
Statement of Comprehensive Income. Impairment losses recognised in respect of
CGUs are allocated first to reduce the carrying amount of any goodwill
allocated to the units, and then to reduce the carrying amounts of the other
assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
m) Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the
company pays fixed contributions into a separate entity and will have no legal
or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
expense in the Statement of Comprehensive Income in the periods during which
services are rendered by employees.
Short term employee benefits
The costs of short-term employee benefits are recognised as a liability and an
expense. The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are rendered.
Termination benefits
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.
n) Share based payments
Employees of the Group receive remuneration in the form of share-based payment
transactions, whereby employees render services as consideration for equity
instruments, known as equity settled transactions.
The Group records compensation expense for all share-based compensation awards
based on the grant date fair value, as adjusted for estimated forfeitures over
the requisite service period of the award. The fair value determined on the
grant date is expensed on a straight-line basis over the term of the grant. A
corresponding adjustment is made to equity.
Modifications and cancellations
When the terms and conditions of equity settled share-based payments at the
time they were granted are subsequently modified, the fair value of the
share-based payment under the original terms and conditions and under the
modified terms is determined. Any excess of the modified fair value is
recognised over the remaining vesting period in addition to the original grant
date fair value. The share-based payment is not adjusted if the modified fair
value is less than the original grant date fair value.
Cancellations or settlements, including those resulting from employee
redundancies, are treated as an acceleration of vesting and the amount that
would have been recognised over the remaining vesting period is recognised
immediately.
Valuation and Amortisation Method
The Company estimates the fair value of stock options granted using the
Black-Scholes option pricing formula or a Monte Carlo simulation.
Provision is made for National Insurance Contributions (NICs) on outstanding
share options that are expected to be settled based upon the latest enacted
NIC rates.
o) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and deposits held at call with
banks.
p) Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, which can be
reliably measured and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects risks specific
to the liability.
q) Net financing costs
Financing expenses comprise interest payable, finance charges on finance
leases recognised in the Statement of Comprehensive Income using the effective
interest method. Financing income comprise bank interest receivable.
Interest income and interest payable is recognised in the Statement of
Comprehensive Income as it accrues, using the effective interest method.
r) Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker ('CODM'). The CODM,
who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board of Directors of ActiveOps
plc.
The Group will provide information to the CODM on the basis of products and
services, being SaaS and T&I services. The CODM receives information for
these two segments down to gross margin level.
s) Taxation
Tax on the profit or loss for the period comprises current and deferred tax.
Tax is recognised in the Statement of Comprehensive Income except to the
extent that it relates to items recognised directly in equity, in which case
it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the period, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
periods.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised.
t) Reserves
Share capital
Share capital represents the nominal value of shares that have been issued.
Share premium account
Share premium includes any premiums received on issue of share capital. Any
transaction costs associated with the issuing of shares are deducted from
share premium, net of any related income tax benefits.
Profit or loss reserves
Retained earnings includes all current and prior period retained profits and
losses.
Share option reserve
The share option reserve is used to recognise the grant date fair value of
options issued to employees but not exercised.
Foreign exchange reserve
The foreign exchange reserve includes all cumulative translation differences
on conversion of the Group's foreign operations from their functional
currencies to its presentation currency of sterling.
3. Revenue
The Group derives all its revenue from the transfer of goods and services over
time.
A disaggregated geographical split of revenue by operating segment is shown
below between Europe, the Middle East, India and Africa ('EMEIA'), North
America and Australia. Europe, the Middle East, India and Africa (EMEIA) are
aggregated together as they operate and are managed as one business. All
revenue streams are recognised over time.
SaaS T&I Total
Year ended 31 March 2023 £000 £000 £000
EMEIA 11,247 2,678 13,925
North America 5,863 175 6,038
Australia 4,948 548 5,496
22,058 3,401 25,459
SaaS T&I Total
Year ended 31 March 2022 £000 £000 £000
EMEIA 10,155 2,297 12,452
North America 5,147 288 5,435
Australia 4,262 768 5,030
19,564 3,353 22,917
4. Segmental analysis
The Group has two reporting segments, being SaaS and T&I. The Group
focuses its internal management reporting predominantly on revenue and cost of
sales. No non-GAAP reporting measures are monitored. Total assets and
liabilities are not provided to the CODM in the Group's internal management
reporting by segment and therefore a split has not been presented below.
Information about geographical revenue by segment is disclosed in note 4.
During the year ended 31 March 2023 approximately £3,745k (2022: £2,083k) of
the groups external revenue was derived from sales to a specific customer
through SaaS and T&I operating segments.
SaaS T&I Total
Year ended 31 March 2023 £000 £000 £000
Revenue 22,058 3,401 25,459
Cost of sales (3,411) (1,268) (4,679)
18,647 2,133 20,780
SaaS T&I Total
Year ended 31 March 2022 £000 £000 £000
Revenue 19,564 3,353 22,917
Cost of sales (2,974) (1,423) (4,397)
16,590 1,930 18,520
5. Exceptional items
2023 2022
For the year ended 31 March £000 £000
Costs associated with M&A aborted activity - 539
The above costs are fees paid to various external advisors. No internal costs
have been included.
6. Taxation
2023 2022
For the year ended 31 March £000 £000
Current income tax
Foreign current tax on profit for the current period 362 214
Foreign current tax on profit for the prior period 34 28
Deferred tax
Origination and reversal of timing differences (139) (128)
Adjustments in respect of prior periods 9 -
Effect of decrease tax rate on opening deferred tax position 1 5
Total tax charge 267 119
2023 2022
For the year ended 31 March £000 £000
Loss before tax (230) (2,612)
Tax at domestic rate of 19% (2022: 19%) (44) (496)
Effect of:
Expenses that are not deductible in determining taxable profit (25) (19)
Differences in current and deferred tax rates 1 5
Deferred tax not recognised 180 494
Withholding taxes 7 4
Adjustments in respect of prior periods - current tax 34 27
Adjustments in respect of prior periods - deferred tax 9
Effect of other tax rates 105 104
Total tax charge / (credit) 267 119
At 31 March 2023 the Company and its Group had tax losses of approximately
£19.5m (2022: £19.2m) to carry forward to offset against future taxable
profits
7. Intangible assets
Goodwill Customer relationships Purchased software Intellectual property rights Capitalisation of development costs Total
£000 £000 £000 £000 £000 £000
Cost
At 1 April 2021 1,128 6,210 845 125 - 8,308
Foreign exchange 26 79 22 - 127
Additions - - - - 364 364
Disposals - - - - -
At 31 March 2022 1,154 6,289 867 125 364 8,799
Foreign exchange 36 135 31 - - 202
Additions (purchases) - - 40 - - 40
Additions (internal developments) - - - - 851 851
At 31 March 2023 1,190 6,424 938 125 1,215 9,892
Amortisation
At 1 April 2021 - 2,112 416 125 - 2,653
Foreign exchange - 7 (22) - (15)
Charge for the year - 614 86 - 700
Disposals - - - - -
At 31 March 2022 - 2,733 480 125 - 3,338
Foreign exchange - 45 8 - - 53
Charge for the year - 630 63 - 73 766
At 31 March 2023 - 3,408 551 125 73 4,157
Net book value
At 31 March 2023 1,190 3,016 387 - 1,142 5,735
At 31 March 2022 1,154 3,556 387 - 364 5,461
All amortisation and impairment charges are included within depreciation and
amortisation in the Statement of Comprehensive Income.
There are two assets included in capitalised development costs which are
material to the financial statements.
Asset Description Carrying Amount Remaining Amortisation Period
£000
CiQ - Capex New features to the ControliQ platform that are expected to further enhance 291 4 years
the proposition for the customer
CaseWorkiQ redevelopment into ControliQ Replatforming CaseWorkiQ data capture and reporting onto the ControliQ 288 5 years
platform to enable a more seamless platform for customers who require both
products.
The aggregate research and development expenditure recognised as an expense
during the period is £4.5m.
Customer relationships consists of two individual assets: the acquired
relationships from the purchase of Open Connect on the 1 August 2019, which
has a netbook value of £1.3m and is being amortised until 31 July 2029; and
the acquired relationships from the purchase of ActiveOps Pty Ltd and Active
Operations Management Australia on the 1 April 2017, which has a netbook value
of £1.7m and is being amortised until 31 March 2027.
The carrying amount of goodwill relates to two cash generating units and
reflects the difference between the fair value of consideration transferred
and the fair value of assets and liabilities purchased.
Goodwill has been allocated for impairment testing purposes to the following
cash generating units. The carrying values are as follows:
2023 2022
At 31 March £000 £000
Australia 577 577
United States of America 613 577
1,190 1,154
The Australian goodwill relates to the purchase of ActiveOps Pty Limited and
Active Operations Management Australia Pty Ltd on the 1 April 2017.
The United States of America goodwill relates to the purchase of OpenConnect
on the 1 August 2019. The residual amount relates to the amount retained in
ActiveOps USA Inc. on disposal of OpenConnect on 19 October 2020.
The Group tests whether goodwill has suffered any impairment on an annual
basis, or more frequently where evidence of impairment indicators exist, by
comparing the value of the CGUs with their value in use. Value in use is
estimated based on expected future cashflows discounted to present value using
a post-tax discount rate that reflects current market assumptions of the time
value of money. An impairment charge arises where the carrying value exceeds
the value in use.
The inputs into the expected cashflows are based on the most recent forecasts
approved and reviewed by the Directors for the next three years based on
expected growth within those CGU's over that period.
The key inputs into the cashflow forecast are:
· Revenue growth, based upon managements expected growth in the Group's
products. These are determined by understanding the needs of current customers
and expected number of license sales pipeline to determine expected future
sales volumes. These sales volumes are coupled with the current pricing to
determine the forecast revenues. Considerations are also made for customer
churn which is based upon current churn rates. T&I revenues are derived
from forecast additional SaaS sales using historical customer behaviours as a
basis.
· Cost of sales and any other direct costs based upon expected
revenues.
· Expected movements in the overhead costs of the business given the
need to indirectly service growth in revenue.
· Future capital expenditure and other changes to working capital as
required to facilitate the forecast revenue growth.
In determining the potential for impairment of the intangible assets the Group
has discounted the cashflows using the three year plan at 12.3% for the
Australian CGU and 12.0% for the United States of America CGU. Management have
not identified any reasonably possible changes in any key assumption that
would lead to the need for impairment of either CGU.
8. Property, plant and equipment
Leasehold improvements Plant and machinery Fixtures, fittings and equipment Total
£000 £000 £000 £000
Cost
At 1 April 2021 199 353 551 1,103
Foreign exchange (28) (25) (101) (154)
Additions - 82 14 96
Disposals - - - -
At 31 March 2022 171 410 464 1,045
Foreign exchange (4) (1) (5) (10)
Additions - 65 25 90
At 31 March 2023 167 474 484 1,125
Accumulated depreciation
At 1 April 2021 193 250 419 862
Foreign exchange (28) (31) (101) (160)
Provided during the period 6 81 57 144
Disposals
At 31 March 2022 171 300 375 846
Foreign exchange (4) (2) (4) (10)
Provided during the period - 71 56 127
At 31 March 2023 167 369 427 963
Carrying amount
At 31 March 2023 - 105 57 162
At 31 March 2022 - 110 89 199
All depreciation and impairment charges are included within depreciation and
amortisation in the Statement of Comprehensive Income.
9. Right of use assets
Buildings
£000
Net book value
At 1 April 2021 736
Foreign exchange (7)
Depreciation charge for the year (165)
At 31 March 2022 564
Foreign exchange (3)
Depreciation charge for the year (142)
At 31 March 2023 419
The right of use asset relates to the property leases for operating premises
across the group.
Amounts recognised in the Statement of Financial Position
2023 2022
At 31 March £000 £000
Lease liabilities
Current 100 139
Non-current 364 501
464 640
Amounts recognised in the Statement of Profit or Loss
2023 2022
For the year ended 31 March £000 £000
Interest expense 37 45
Expense for short term leased properties 150 95
Depreciation of Right-of-use assets 142 165
Amounts recognised in the Statement of Cashflows
2023 2022
For the year ended 31 March £000 £000
Total cash outflows 360 324
10. Trade and other receivables
2023 2022
At 31 March £000 £000
Trade receivables 5,507 2,723
Prepayments and accrued income 675 953
Other receivables 191 78
6,373 3,754
The Directors consider the carrying value of trade and other receivables to be
approximately equal to their fair value.
2023 2022
At 31 March £000 £000
Trade receivables from contracts with customers 5,563 2,770
Less loss allowance (56) (47)
5,507 2,723
Trade receivables are amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for
settlement within 30 days and are therefore all classified as current. Trade
receivables are recognised initially at the amount of consideration that is
unconditional. The group holds the trade receivables with the objective of
collecting the contractual cash flows, and so it measures them subsequently at
amortised cost using the effective interest method. Details about the group's
impairment policies and the calculation of the loss allowance are provided in
note 2.
Information about the impairment of trade receivables and the group's exposure
to credit risk and foreign currency risk can be found in note 22.
11. Trade and other payables
2023 2022
At 31 March £000 £000
Trade payables 167 1,326
Other taxation and social security 1,360 815
Other payables 5 3
Accruals and deferred income 17,328 11,553
18,860 13,697
Trade payables are unsecured and are usually paid within 30 days of
recognition. The carrying amounts of trade and other payables are considered
to be the same as their fair values, due to their short-term nature.
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