REG - Checkit PLC - Final Results
25/04/2024 07:00
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RNS Number : 9253L Checkit PLC 25 April 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF UK MARKET
ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT THIS INSIDE
INFORMATION IS NOW CONSIDERED TO BE WITHIN THE PUBLIC DOMAIN.
25 April 2024
Checkit plc
("Checkit", the "Company" or the "Group")
Final results for the Year Ended 31 January 2024
Checkit plc (AIM: CKT), the augmented workflow and smart sensor automation
company for frontline workers, is pleased to report its audited final results
for the year ended 31 January 2024 ("FY24"). The audited accounts and annual
report for FY24 will be published ahead of the Company's Annual General
Meeting, which is expected to take place on 6 June 2024.
The Group's management team will host a live webinar which will include an
opportunity for questions at 14:00 (BST) today. The webinar can be accessed
via the news area of the website at https://www.checkit.net/news/
(https://www.checkit.net/news/) or by using this link:
https://www.investormeetcompany.com/checkit-plc/register-investor
(https://gbr01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.investormeetcompany.com%2Fcheckit-plc%2Fregister-investor&data=05%7C01%7CHugh.Wooster%40checkit.net%7Cdd2fb3d65ff9412a06c708dae1a815bb%7Cc766b9048fbf43bea8450cab82a691e9%7C1%7C0%7C638070409271004915%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=utsFc9ht3y2TWaqsmaiiF6tmf%2F2JUOBjGHoyFJy0O1A%3D&reserved=0)
FY24 HIGHLIGHTS
· Annual recurring revenue ("ARR") growth of 16% to £13.3m* (FY23:
£11.5m) in line with market expectations, despite a challenging global
economy
· Recurring revenue increased +17% to £11.2m (FY23: £9.6m)
· Compound recurring revenue growth of 30% since FY20, reflecting
strategic focus on subscription based sales
· Total Group revenue from continuing operations of £12.0m (+17%)
(FY23: £10.3m)
· Net revenue retention ("NRR") of 111%**, demonstrating land and
expand strategy
· New product functionality, enabling customers to deliver
sustainability and energy saving initiatives
· Progress towards profitability, with a 46% improvement in adjusted
LBITDA*** from continuing operations of £3.4m (FY23: loss of £6.4m), driven
by revenue growth of 17%, an increase in gross margins to 67% (FY23: 63%) and
an 11% reduction in operating costs
· Net cash at year end of £9.0m (FY23: £15.6m), with a 23%
reduction in cash burn in FY24 vs. FY23
Outlook
· Trading since the start of the new financial year has seen continued
momentum in line with the Board's and market expectations. We continue to
execute against our growth strategy and develop our technology, while
progressing on our path to profitability.
· The Board expects to reach breakeven in FY27 (calendar year 2026) and
are confident the Company has sufficient resources to achieve this.
Kit Kyte, CEO of Checkit, commented: "Checkit has successfully reduced its
financial losses by 46% this fiscal year while continuing to escalate our
growth through strategic 'land and expand' opportunities. We are on track to
become cashflow breakeven and anticipate posting a positive EBITDA performance
in FY27. The launch of our new product Asset Intelligence marks an exciting
chapter in the evolution of our offering and demonstrates the synergies in the
Checkit product ecosystem as data collected from IoT sensors acts as a
catalyst for future software growth. We continue to focus on our twin goals of
expedited profitability whilst driving top-line growth in the business and
look forward to FY25 with confidence."
NOTES
* Annual Recurring Revenue ("ARR") is defined as the annualised value of
contracted recurring revenue from subscription services as at the period end,
including committed annual recurring revenue from new wins.
** Net retention revenue ("NRR") is defined as the amount of recurring revenue
from existing customers retained over the year, excluding new wins in the last
12 months.
*** Adjusted LBITDA is the loss on operating activities before depreciation
and amortisation, share based payment charges and non-recurring or special
items.
Checkit plc +44 (0) 1223 643 313
www.checkit.net
Kit Kyte (Chief Executive Officer)
Greg Price (Chief Financial and Operations Officer)
Singer Capital Markets (Nominated Adviser and Broker) +44 (0) 207 496 3000
Shaun Dobson / Harry Gooden / James Fischer
Tavistock (Financial PR) +44 (0) 20 7920 3150
Lulu Bridges / Katie Hopkins / Simon Hudson
CHAIRMAN'S STATEMENT
Dear Shareholders
Despite the economic uncertainty that has characterised the financial year
ending 31 January 2024, Checkit has delivered an operating performance in
line with Board and market expectations with annual revenues increased by 17%
over last year. I am particularly pleased that we delivered losses (adjusted
LBITDA) better than expected and nearly halving for the year to £3.4m (FY23:
LBITDA of £6.4m) whilst recurring revenues now account for 93% of total
revenues.
After transitioning to an exclusively subscription-based model, our goal now
is to enhance revenue growth in our key markets of Western Europe and North
America. With a solid financial foundation, we are well-positioned to pursue
our growth objectives, advance our technology, improve operational
efficiencies, and hasten our progress towards profitability. I should like to
thank Chief Executive Officer Kit Kyte and the rest of the senior management
team who led the Group effectively during what was a difficult macro-economic
environment. You will read more about the team's vision below.
We are helping large blue-chip customers to be as productive, efficient, and
compliant as possible in the face of cost pressures and operational
complexities. Our industry-leading customer retention rates demonstrate how
embedded our growing range of capabilities have become within our clients'
technology stacks; a trend we expect to continue as the tailwinds of digital
transformation, operational efficiency imperatives, and automation
strengthen.
In FY24, we have re-examined each of our markets and products and concluded
there is substantial long-term value to be created by continuing to invest in
product innovation to spearhead the growth of our high quality recurring
subscription revenue. Our levels of recurring revenue give us excellent future
income visibility and provide a stable platform from which to expedite the
path to profitability, a key Company priority over the next two years.
On behalf of the Board, I would like to thank each member of our teams in
Cambridge, London, Fleet and Tampa for their commitment in FY24. Across the
business, our people consistently demonstrate their ingenuity, tenacity,
ambition and humanity. They are our most valuable asset and the reason for our
success.
Keith Daley
Chair
CEO'S STATEMENT
Reflecting on a year filled with macro-economic challenges, we are both
excited about our progress and proud of the support we've provided to our
customers, equipping them with the insights, tools, and strategies needed to
succeed in difficult times. Our 'land and expand' strategy of up-selling and
cross-selling has generated growth from our existing customer base, whilst at
the same time we have actively identified areas of expansion and opportunity
both geographically and vertically. With recurring revenues now representing
93% of the total and our high net revenue retention of 111%, we have a sound
base to pursue our drive towards profitability.
Financial performance
Checkit's financial results for FY24 were in line with Board and market
expectations, generating an overall increase in ARR of 16% to £13.3m (FY23:
£11.5m). Revenue has grown by 17% to £12.0m, despite the challenging global
economy. This represents a fourth consecutive year of high-quality recurring
revenue growth.
Our focus on gross margin expansion continues to deliver with a 4% improvement
to 67%. We delivered losses (adjusted LBITDA) better than expected and nearly
halving for the year to £3.4m (2023: LBITDA of £6.4m) as we drive
operational efficiencies and carefully manage costs across the business.
The Company continues to expand into the extensive US market, achieving 21%
year-on-year growth in US ARR contribution from £2.8m in FY23 to £3.4m in
FY24. This steady expansion demonstrates the measurable benefits we offer to
customers, including operational insight, enhanced staff retention,
cost-effectiveness, and heightened compliance.
Our drive to profitability continues with an improvement in LBITDA for the
year to £3.4m (FY23: £6.4m), driven by the growth in revenues and reduced
operating costs. Product development spend reduced by 7% to £3.9m (FY23:
£4.2m), although the amount capitalised increased by 11% to £2.0m (FY23:
£1.8m), as the Group invested in developing AI capability and unifying
products around our platform. Sales and marketing investment decreased by 12%
to £2.6m (FY23: 3.0m), with a focus on existing customers and identifying
opportunities in adjacent markets and geographies.
Through our "land and expand" customer strategy, we win new business in a
discreet customer location or function and form close customer bonds that
allow us to expand the services we offer over time. We do this by building
trust through valuable insights and enhancing our customers' own operational
performance. Our ability to grow with our customers is demonstrated by a net
retention rate of 111% and provides visibility on future ARR growth.
The economic environment remains challenging and the Board remains cautious
about the impact of geopolitical trends on the development of the business. As
a result, our focus is to achieve an accelerated path to profitability by
balancing our growth ambitions with an increased emphasis on cost efficiency.
This was demonstrated in FY24 by an increased gross margin of 67% (FY23: 63%),
as well as operational cost savings across the business. The net cash position
of £9m as at 31 January 2024 means we are well positioned to continue on
our growth trajectory, and to develop our technology at the same time as
achieving further cost efficiencies.
Growth strategy and ambitions
Our growth strategy is showing results. We are fulfilling market needs with a
comprehensive solution that excels in data and analytics, offering insights
that empower our customers to make informed decisions. Our goal to lead in
augmented workflow management for the deskless industry is within reach. We've
made significant strides in transforming Checkit into a predominantly
subscription-based model, with non-recurring revenues now only 7% of our total
revenue. This shift enhances our revenue predictability and strengthens our
customer engagements, paving the way for increased contract values.
The Group's focus is around building a sustainable and higher conversion rate
pipeline across the retail, healthcare, facilities management, franchise and
biopharma verticals. We are increasing customer loyalty by continuously
investing in our platform, including its capacity to incorporate external
technologies, positioning us at the forefront of the market. Our sales and
marketing efforts are geared towards generating high-quality leads with
improved conversion rates, especially in our key sectors and expanding further
into the US market. Checkit's new customer pipeline in the US - a key growth
market - includes a number of multi-site organisations across the healthcare,
food retail, hospitality, and biopharma sectors. The US remains on course to
be the largest contributor to Group revenues.
Concurrently, we are committed to refining our operational efficiencies to
expedite profitability and deliver shareholder value. Looking ahead, we are
open to strategic partnerships that could further scale our business. However,
balancing cost management with growth initiatives will be crucial to maintain
a culture of excellence within the Checkit team.
Innovation
Our vision is to reshape business performance through a combination of
automation and human ingenuity. Our ambition is to pioneer in leveraging the
transformative potential of three pivotal technological trends: the
integration of Internet of Things (IoT) sensors, the digitisation of frontline
work, and the application of Artificial Intelligence (AI). Individually, each
of these technologies offers significant advantages; however, their true power
is realised when they are seamlessly integrated, unlocking unparalleled value
for our clients.
The essence of our innovation lies in the intelligent orchestration of IoT
sensors, digital workflows, and AI. IoT sensors revolutionise traditional data
collection methods with continuous and automated sensing capabilities. When
coupled with AI, these sensors not only capture and monitor data but also
unveil opportunities to enhance customer performance and foresee potential
issues. This integration is further amplified when combined with digital
workflows, enabling real-time, actionable responses by dedicated workforces.
Our digital workflows transform outdated manual processes into streamlined,
guided procedures for our customers. This transformation is exponentially
enhanced by IoT automation and AI-driven insights, facilitating process
improvements and targeted training opportunities. AI's capability to process
and analyse vast data sets becomes significantly more valuable when integrated
with IoT and digital workflows, allowing for immediate application of insights
and converting them into tangible actions.
At the core of Checkit's strategy and competitive edge is the exploitation of
these combined capabilities within a unified platform. This unique capability
positions us to solve a broad spectrum of our customers' business challenges.
Our initial focus has been on critical areas such as food safety, service
operations, and the monitoring of medical and life science
environments-sectors that demand rigorous continuous monitoring and efficient
workflow management, areas where the synergy of modern analytics and AI
surpasses traditional human oversight.
As we continue to navigate this journey, we are resolved to harness emerging
technological opportunities that are relevant. We are committed to expanding
our reach and enhancing the value we deliver. The road ahead is filled with
promise, and we are eager to lead the way in transforming how businesses
leverage technology for unparalleled efficiency and effectiveness.
Positive outlook
Our mission is to streamline and digitise the work and processes of the
deskless workforce, a goal that has never been more critical. We understand
the profound effect that simplifying operational management can have on
organisational success, employee wellbeing, and customer satisfaction.
Alongside our Chair and management team, I extend heartfelt thanks to our
global team for their resilience and dedication. I am immensely proud of what
we have accomplished, from establishing a leading market position to building
a robust, long-term customer base with international, blue-chip clients. We
are just at the beginning of our journey and the potential for growth is vast.
Current global supply chain issues, increasing labour costs and higher
compliance demands highlight the growing importance of making deskless work
simpler and more efficient. Looking forward, the Board is optimistic about
meeting market expectations for FY25 and confident in our ability to continue
to achieve strong, sustained organic growth.
Kit Kyte
CEO
FINANCIAL REVIEW
Progressing on the path to profitability
Financial results in FY24 reflect execution against a wide range of metrics
with revenue growth, increasing gross margins and reducing operating cost.
Revenue has grown by 17% to £12.0m, in line with market expectations despite
the challenging global economy. Our 'Land and Expand' strategy of up-selling
and cross-selling has generated growth from our existing customer base, whilst
at the same time we have actively identified areas of expansion and
opportunity both geographically and vertically.
Adjusted LBITDA of £3.4m (FY23: £6.4m), an improvement of 46%, reflects the
Group's strategic priority to balance growth with driving operational
efficiencies. As a result, gross margin increased to 67% (FY23: 63%) and
operating expenses reduced by 11%.
With recurring revenues now representing 93% of the total and our high net
revenue retention of 111%, we have a sound base to pursue our drive towards
profitability. The Group continues to benefit from a strong balance sheet and
with the economic environment remaining challenging, will continue to execute
against its growth strategy and develop its technology, whilst also driving
further operating efficiencies and progressing on the path to profitability.
ARR and Revenue
ARR grew by 16% to £13.3m (FY23 £11.5m), in line with market
expectations.
Total Group revenue for FY24 was £12.0m, an increase of 17% compared to the
prior year (FY23 £10.3m).
(£'m) Reported Twelve months to
31 January 2024 31 January 2023 % Change
ARR(1) 13.3 11.5 16%
Revenue
Recurring 11.2 9.6 +17 %
Non-recurring 0.8 0.7 +18 %
Total Group 12.0 10.3 +17 %
ARR growth was achieved through both sales to new customers, as well as upsell
with existing customers and improved pricing, as we continued to benefit from
our "land and expand" strategy and maintained high retention rates.
Sales bookings have benefitted from a number of small wins with potential for
future upsell, supported by a master service agreement signed with Compass
Contract Services (U.K) Limited ("Compass") for the provision of CAM and CWM
to their end users, primarily in the food services sector. Since signing the
MSA with Compass, Checkit has entered into several new contracts with Compass
and is in discussion over further opportunities.
We have also secured our largest contract renewal, with John Lewis plc, at
£6m total contract value over three years. Although the sales cycle has
lengthened as a result of customer caution in the current environment, our
pipeline remains strong.
The Group has also continued to grow in the US, with 21% growth in ARR to
£3.4m (FY23: £2.8m).
Our land and expand strategy, where we look to prove our value in an initial
relationship with customers and then build over time, allows us to grow with
our customers, identifying additional use cases, extending our footprint and
driving price initiatives. This is evidenced in a net retention rate of
111%(2) and a gross retention rate of 99%(2).
LBITDA
Checkit's adjusted LBITDA for the year was £3.4m (FY23: £6.4m), an
improvement of 46%, reflecting a milestone on our path to profitability. As we
balance our growth strategy with an increased focus on operational efficiency,
this has maintained revenue growth of 17%, while improving gross margin to 67%
and reduced operating costs by 11%.
Gross margin improvement to 67% (FY23: 63%) was driven by increased efficiency
from utilising third party providers in our delivery model, as well as the
full year effect of procurement savings secured in our platform costs.
Operating expenses reduced by 11%, as we controlled costs in the face of the
challenging economic environment and pursued efficiency opportunities in our
operations. These included the introduction of automated call handling and
offshoring part of the customer support team in H2.
As a result of the focus on cost management, investment in sales and marketing
reduced by 12% in the year to £2.6m (FY23: £3.0m), with a focus on our
existing customer base and identifying opportunities in adjacent markets and
geographies.
New product development (NPD) spend also reduced by 7% to £3.9m (FY23:
£4.2m) as a result of efficiencies achieved, although the amount capitalised
increased to £2.0m (FY23: £1.8m), as the Group invested in developing our AI
capabilities and unifying our products around our platform.
This tailored investment allows us to introduce innovation to our technology
and offer increased scope and value to customers, which will drive the next
phase of our growth and enable continuing progress towards
profitability.
Non-recurring or special items
Non-recurring or special items in the year of £0.2m related to amortisation
of acquired intangible assets, and restructuring costs related to the cost
efficiency programme:
FY24
£m
Restructuring costs 0.1
Amortisation of acquired intangible assets 0.1
Total non-recurring or special items 0.2
Taxation
The Group is currently loss making and therefore no corporate tax charge is
reported for the year FY24. There remains over £30m in group carried forward
taxable losses and therefore there is no expectation of tax payments in the
short to medium term.
Contingent liability
Checkit plc and HMRC have been in correspondence since early 2022 regarding
matters of input tax recoverability. The matter is ongoing and the substance
of discussions remains unchanged from the prior year. A statutory review of
the case is being conducted and management continue to disagree with HMRC's
position. Specialist tax advice has been sought throughout the correspondence.
The total amount of input tax claimed since VAT registration to 31 January
2023 is £1.2m. Given the uncertainty and materiality of the issue, we do not
consider it appropriate at this stage to provide for this and are disclosing
as a contingent liability.
EPS - continuing operations
The weighted average number of shares in issue in FY24 was 108.0m. Loss per
share (basic & diluted) was 4.2 pence (FY23: 11.2 pence)
Cash
The Group cash position at 31 January 2024 was £9.0m (31 January 2023:
£15.6m), reflecting the 46% reduction in LBITDA and the strategic purchase of
inventory to mitigate supply chain constraints in the market. We expect this
position to unwind over the next 12-18 months, supporting further revenue
growth. FY24 saw a 23% reduction in cash burn in comparison to FY23. With the
completion of inventory purchases, we expect cash burn to continue to reduce
into FY25. The strong cash position bolsters Checkit's strategic drive to
profitability, whilst maintaining its growth strategy and technology
development.
Consolidated statement of comprehensive income
year ended 31 January 2024
Notes 2024 2023
£m £m
Revenue 2 12.0 10.3
Cost of sales (4.0) (3.8)
Gross profit 8.0 6.5
Operating expenses (11.4) (12.9)
Adjusted LBITDA* (3.4) (6.4)
Depreciation and amortisation (1.3) (1.0)
Share-based payment charge (0.2) (0.2)
Non-recurring or special items 3 (0.2) (4.8)
Operating loss 3 (5.1) (12.4)
Finance income 0.5 0.1
Loss before taxation (4.6) (12.0)
Taxation 5 0.1 0.3
Loss from continuing operations (4.5) (12.0)
Loss from discontinued operations 8 - (0.3)
Loss for the year attributable to equity shareholders (4.5) (12.3)
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations - -
Reclassification of exchange differences to income statement for discontinued - -
items
Total comprehensive expense for the financial year attributable to equity (4.5) (12.3)
shareholders
Loss per share from continuing operations
Basic EPS 6 (4.2)p (11.2)p
Diluted EPS 6 (4.2)p (11.2)p
*Adjusted loss before interest, tax, depreciation and amortisation ("LBITDA")
is calculated by taking operating profit and adding back depreciation &
amortisation, share-based payment charge and non-recurring or special items
Consolidated balance sheet
as at 31 January 2024
Notes 2024 2023
£m £m
Assets
Non-current assets
Goodwill arising on acquisition 7 0.2 0.2
Other intangible assets 7 4.8 3.8
Property, plant and equipment 0.8 0.9
Total non-current assets 5.8 4.9
Current assets
Inventories 3.8 2.4
Trade and other receivables 4.5 4.5
Cash and cash equivalents 9.0 15.6
Total current assets 17.3 22.5
Total assets 23.1 27.4
Current liabilities
Trade and other payables 7.8 7.5
Contract lease liabilities 0.2 0.3
Total current liabilities 8.0 7.8
Non-current liabilities
Deferred tax liabilities - -
Long-term contract lease liabilities 0.3 0.3
Long-term provisions 0.2 0.4
Total non-current liabilities 0.5 0.7
Total liabilities 8.5 8.5
Net assets 14.6 18.9
Equity attributable to the owners of the Company
Called up share capital 5.4 5.4
Share premium 23.3 23.3
Capital redemption reserve 6.4 6.4
Other reserves 0.5 0.3
Retained earnings (21.0) (16.5)
Total equity 14.6 18.9
Consolidated statement of changes in equity
year ended 31 January 2024
Share Share Capital Other Translation Retained Total
capital premium redemption reserves reserve earnings £m
£m £m reserve £m £m £m
£m
At 31 January 2022 5.4 23.3 6.4 0.1 - (4.2) 31.0
Loss for the year - - - - - (12.3) (12.3)
Total comprehensive income for the year - - - - - (12.3) (12.3)
Share based payments - - - 0.2 - - 0.2
Transaction with owners - - - 0.2 - - 20.2
At 31 January 2023 5.4 23.3 6.4 0.3 - (16.5) 18.9
Loss for the year - - - - - (4.5) (4.5)
Total comprehensive income for the year - - - - - (4.5) (4.5)
Share based payments - - - 0.2 - - 0.2
Transaction with owners - - - 0.2 - - 0.2
At 31 January 2024 5.4 23.3 6.4 0.5 - (21.0) 14.6
Consolidated statement of cash flows
Notes 2024 2023
£m £m
Net cash outflow from operating activities 4 (4.7) (6.4)
Investing activities
Interest received on bank deposits 0.5 0.1
Purchase of property, plant and equipment (0.1) (0.2)
Investment in product development projects (2.0) (1.8)
Investment in other intangibles - (0.2)
Sale of businesses (net of cash sold) 8 - 0.2
Net cash used in investing activities (1.6) (1.9)
Financing activities
Repayment of contract lease liabilities (0.3) (0.3)
Net cash utilised by financing activities (0.3) (0.3)
Net decrease in cash and cash equivalents (6.6) (8.6)
Cash and cash equivalents at the beginning of the year 15.6 24.2
Cash and cash equivalents at the end of the year 9.0 15.6
1. Basis of Preparation
The consolidated statement of comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in equity, the consolidated cash
flow statement and the associated notes for the year ended 31 January 2024
have been extracted from the Group's financial statements upon which the
auditor's opinion is unqualified and does not include any statement under
section 498 of the Companies Act 2006.
There were no new standards or amendments or interpretations to existing
standards that became effective during the year that were material to the
Group.
No new standards, amendments or interpretations to existing standards having
an impact on the financial statements that have been published and that are
mandatory for the Group's accounting periods beginning on or before 1 February
2024, or later periods, have been adopted early.
Whilst the financial information included in this announcement has been
computed in accordance with international accounting standards, this
announcement does not itself contain sufficient information to comply with all
IFRS disclosure requirements. The Company's 2024 Annual Report and Accounts
will be prepared in compliance with UK-adopted International Accounting
Standards (IFRS).
This announcement does not constitute a dissemination of the annual financial
report and does not therefore need to meet the dissemination requirements for
annual financial reports. A separate dissemination announcement in accordance
with Disclosure and Transparency Rules (DTR) 6.3 will be made when the annual
report and audited financial statements are available on the Company's
website.
Statutory Information
The financial information included in this announcement does not constitute
statutory accounts and is consistent with the accounting policies of the
Group, which were set out on pages 55 to 61 of the 2023 Annual Report and
Accounts.
The statutory accounts for the year ended 31 January 2024 will be finalised on
the basis of the financial information presented by the directors in this
announcement and will be delivered to the Registrar of Companies following the
Group's Annual General Meeting. The announcement of the results was approved
on behalf of the Board of directors on 24 April 2024.
2. Segmental reporting
Management provides information reported to the Chief Operating Decision Maker
("CODM") as a single operating segment for the purpose of assessing
performance and allocating resources. The CODM is the Chief Executive Officer.
The Group's main activities are the supply of Connected Workflow Management,
automated monitoring, Internet of Things ("IoT"), and operational
insight-based products and services.
Revenue by type of the continuing operations
The following table presents the different revenue streams of Checkit:
2024 2023
£m £m
Recurring revenues from subscription services 11.2 9.6
Consultancy and other services 0.8 0.7
Total 12.0 10.3
Geographical information
Revenue from external customers
2024 2023
£m £m
United Kingdom 8.9 7.7
The Americas 3.1 2.6
Total 12.0 10.3
Information about major customers of the continuing operations
During FY24, the Group had one customer who generated revenues of 17% of total
revenue (FY23: 16%).
Revenue expected to be recognised
The Group expects to recognise revenue amounting to £4.6m (FY23: £4.1m) in
FY25 relating to performance obligations from existing contracts that are
unsatisfied or partially satisfied as at 31 January 2024.
3. Operating loss - continuing operations
2024 2023
£m £m
Operating loss is stated after charging:
Product development costs expensed 1.9 2.4
Depreciation on owned property, plant and equipment 0.1 0.1
Depreciation on right-of-use assets 0.3 0.4
Amortisation on development costs 0.7 0.3
Amortisation on computer software 0.2 0.2
Auditor's remuneration:
- fees payable to the Company's auditor for the audit of the Company's annual 0.1 -
accounts
- fees payable to the Company's auditor for the audit of the Company's 0.1 0.1
subsidiaries pursuant to legislation
Total audit fees for audit services 0.2 0.1
Tax services - -
Total auditor's remuneration 0.2 0.1
Non-recurring or special items:
- restructuring and integration costs 0.1 -
- impairment of goodwill - 4.3
- amortisation of acquired intangible assets 0.1 0.5
Total non-recurring or special items 0.2 4.8
Included within auditor's remuneration for audit services in FY24 is a sum for
less than £0.1m (2023: less than £0.1m) for the audit of overseas
subsidiaries carried out by an auditor other than Cooper Parry Group Limited.
Cooper Parry Group Limited was paid £nil for tax advisory and compliance
services (2023: £nil).
4. Net cash flows from operating activities
Notes 2024 2023
£m £m
Loss before interest and taxation
- from continuing operations (5.1) (12.3)
- from discontinued operations (before tax) 8 - (0.3)
Adjustments for:
Depreciation 0.4 0.5
Amortisation 1.0 1.0
Impairment of goodwill - 4.3
Share-based payments 0.2 0.2
Operating cash flow before working capital changes (3.5) (6.6)
Decrease/(increase) in trade and other receivables 0.1 (1.7)
Increase in inventories (1.4) (0.6)
Increase in trade and other payables 0.3 2.3
Operating cash flow after working capital changes (4.5) (6.5)
(Decrease)/increase in provisions (0.2) 0.1
Cash utilised by operations (4.7) (6.5)
Tax credit received - 0.1
Net cash outflow from operating activities (4.7) (6.4)
5. Taxation
(a) Analysis of tax credit for the year - continuing operations
2024 2023
£m £m
Current taxation:
UK corporation tax (credit) on loss for the year (0.1) (0.1)
Adjustment in respect of prior periods - (0.1)
Total current taxation (0.1) (0.2)
Deferred tax:
On separately identifiable acquired intangibles (as a result of amortisation) - (0.1)
Total deferred taxation - (0.1)
Tax credit on continuing operations (0.1) (0.3)
(b) Analysis of tax charge for the year - discontinued operations
2024 2023
£m £m
Current taxation:
UK corporation tax charge on profit for the year - -
Overseas corporation tax charge on profit for the year - -
Overprovision for prior year - UK - -
Total current taxation - -
Deferred tax:
Origination and reversal of temporary differences - -
Under provision in respect of prior years - -
Total deferred taxation - -
Tax charge on discontinued operations - -
(c) Factors affecting taxation credit for the year - continuing operations
The effective tax rate for the year was 24%.
2024 2023
Tax rate £m Tax rate £m
Loss on ordinary activities before taxation (4.6) (12.0)
Loss on ordinary activities multiplied by weighted average standard rate of 24.0% (1.1) 19.0% (2.3)
corporation tax
in the UK of 24%
Effects of:
Expenses not deductible for tax purposes (3.2%) 0.1 (7.5%) 0.9
Income not deductible 2.1% (0.1) - -
Prior year adjustments - - 1.0% (0.1)
Temporary differences not recognised (18.7%) 0.9 (1.6)% 0.2
Tax losses not recognised - - (9.2)% 1.1
R&D tax credit (1.6%) 0.1 1.0% (0.1)
Surrender of losses to discontinued operations - - 0% -
2.2% (0.1) (2.5)% (0.3)
(d) Factors affecting taxation charge for the year - discontinued operations
2024 2023
Tax rate £m Tax rate £m
Loss on ordinary activities before taxation - (0.3)
Loss on ordinary activities multiplied by weighted average standard rate of 19.0% (0.1)
corporation tax in the UK of 19%
- -
Effects of: - -
Temporary differences not recognised - - 19.0% 0.1
- - - -
(e) Factors that may affect future taxation charges
Deferred taxation assets amounting to £7.7m (2023: £6.5m) have not been
provided in respect of unutilised income tax losses of £30.8m (2023: £25.8m)
that can only be carried forward against future taxable income of that same
trade as there is currently insufficient evidence that these assets will be
recovered.
The UK Budget 2021 announcements on 3 March 2021 included measures to support
economic recovery as a result of the ongoing COVID-19 pandemic. These included
an increase to the UK's main corporation tax rate to 25%, which was effective
from 1 April 2023. These changes were substantively enacted at the balance
sheet date and hence, any deferred tax balances have been calculated as at
25%.
6. Earnings per share
Earnings per share (EPS) is the amount of post-tax profit attributable to each
share (excluding those held by the Company). Basic EPS measures are calculated
as the Group profit for the year attributable to equity shareholders divided
by the weighted average number of shares in issue during the year. Diluted EPS
takes into account the dilutive effect of all outstanding share options priced
below the market price, in arriving at the number of shares used in its
calculation.
Both of these measures are also presented on an adjusted basis, to remove the
effects of non-recurring or special items, being items of both income and
expense which are sufficiently large, volatile or one-off in nature, to assist
the reader of the financial statements to get a better understanding of the
underlying performance of the Group. The note below demonstrates how this
calculation has been performed.
Key 2024 2023
m m
Weighted average number of shares for the purpose of basic earnings per share A 108.0 108.0
Dilutive effect of employee share options1 - -
Weighted average number of shares for the purpose of diluted earnings per B 108.0 108.0
share
Key £m £m
Loss for the year F (4.5) (12.3)
Loss from discontinued operations, net of tax E - 0.3
Continuing loss for the year attributable to equity shareholders C (4.5) (12.0)
Total non-recurring or special items net of tax 0.1 4.5
Loss for adjusted EPS D (4.4) (7.5)
Key 2024 2023
EPS measures
Basic and diluted1 continuing EPS C/A (4.2)p (11.2)p
Adjusted EPS measures
Adjusted basic and diluted1 continuing EPS D/A (4.1)p (6.9)p
The adjusted EPS information is considered to provide a fairer representation
of the Group's trading performance.
Discontinued earnings per share
Key 2024 2023
EPS measures
Basic EPS E/A - (0.3)p
Diluted EPS1 E/B - (0.3)p
Total earnings per share for the year attributable to equity shareholders
Key 2024 2023
EPS measures
Basic EPS F/A (4.2)p (11.5)p
Diluted EPS1 F/B (4.2)p (11.5)p
* In the current and prior year, the dilutive impact of employee
share options is ignored since there is no dilutive impact on continuing
operations EPS measures given the continuing loss for the year.
7. Intangible assets
Development Computer Acquired Total
costs software intangible £m
£m £m assets Goodwill
£m £m
Cost
At 1 February 2022 8.0 0.8 4.3 4.5 17.6
Additions 1.8 0.2 - - 2.0
Disposals - - - - -
At 31 January 2023 9.8 1.0 4.3 4.5 19.6
Additions 2.0 - - - 2.0
Disposals - - - - -
At 31 January 2024 11.8 1.0 4.3 4.5 21.6
Amortisation
At 1 February 2022 6.5 0.1 3.7 - 10.3
Charge for the year 0.3 0.2 0.5 - 1.0
Impairment - - - 4.3 4.3
Disposals - - - - -
At 31 January 2023 6.8 0.3 4.2 4.3 15.6
Charge for the year 0.7 0.2 0.1 - 1.0
Disposals - - - - -
At 31 January 2024 7.5 0.5 4.3 4.3 16.6
Carrying amount
At 1 February 2022 1.5 0.7 0.6 4.5 7.3
At 31 January 2023 3.0 0.7 0.1 0.2 4.0
At 31 January 2024 4.3 0.5 - 0.2 5.0
Acquired intangible assets are made up of the separately identified
intangibles acquired with the purchase of Next Control Systems in May 2019 and
those acquired with the purchase of Tutela LLC in February 2021.
Impairment testing for goodwill
The Group identifies cash-generating units (CGUs) at the operating company
level, as this represents the lowest level at which cash inflows are largely
independent of other cash inflows. Goodwill acquired in a business combination
is allocated, at acquisition, to the groups of CGUs that are expected to
benefit from that business combination.
Goodwill relates to the acquisition of Checkit UK Limited in May 2019 and of
Checkit LLC in February 2021.
Goodwill values have been tested for impairment by comparing them against the
"value in use" in perpetuity of the relevant CGU group. The value in use
calculations were based on projected cash flows, derived from the latest
forecasts prepared by management and budgets approved by the Board, discounted
at CGU specific, risk adjusted, discount rates to calculate their net present
value.
Key assumptions used in "value in use" calculations
The calculation of "value in use" is most sensitive to the CGU specific
operating and growth assumptions, that are reflected in management forecasts
for the five years to January 2029. CGU specific operating assumptions are
applicable to the forecasted cash flows and relate to revenue forecasts and
forecast operating margins in each of the operating companies and are based on
the strategic plans for the Group. Long-term growth rates are capped at 1%.
The revenue growth rates used in the cash flow forecast are based on
management's expectations of the future opportunities for the Checkit platform
and the ability to upsell to existing customers on a global basis, including
the planned US expansion. The forecasts include the costs associated with
delivering the Checkit platforms, which are directly linked to the forecast
sales growth.
Discount rates are based on estimations of the assumptions that market
participants operating in similar sectors would make, using the Group's
economic profile as a starting point and adjusting appropriately. Sensitivity
to the discount rate has been applied to evaluate impairment testing using
discount rates ranging from 10% to 20%.
Following the decision to close the BEMS business unit, management has
assessed that the carrying value of the goodwill associated with the
acquisition of Checkit UK should continue to be fully impaired.
The carrying value in relation to the acquisition of Checkit LLC has not
identified any impairment.
8. Discontinued operations
During the prior year, the Group discontinued its activity in Building Energy
Management Systems, consequently the results from this revenue stream were
included as discontinued operations.
Total discontinued operations comprise:
2024 2023
£m £m
Revenue - 0.6
Cost of sales - (0.7)
Gross loss - (0.1)
Operating expenses - (0.2)
Loss before tax - (0.3)
Attributable tax - -
loss from discontinued operations before gain on disposal - (0.3)
Gain on disposal and loss on re-measurement - -
Attributable tax to gain - -
Loss from discontinued operations attributable to equity shareholders - (0.3)
Foreign currency reserve reclassification - -
Other comprehensive income from discontinued operations - (0.3)
Building Energy Management Systems
The results of ceasing operations of Building Energy Management Systems, which
have been included in the consolidated statement of comprehensive income, were
as follows:
2024 2023
£m £m
Revenue - 0.6
Cost of sales - (0.7)
Gross profit/(loss) - (0.1)
Operating expenses - (0.2)
Profit/(loss) before tax - (0.3)
Attributable tax - -
Profit/(loss) from Building Energy Management Systems - (0.3)
Gain on sale and loss on re-measurement to fair value - -
Profit/(loss) from Building Energy Management Systems discontinued operation - (0.3)
attributable to equity shareholders
Cash flows from Building Energy Management Systems
2024 2023
£m £m
Net cash outflow from operating activities - (0.3)
Net cash inflow from investing activities
Cash received on sale of assets - -
Expenditure on intangible assets - -
Total net cash inflow from investing activities - -
Interest payable - -
Total net cash inflow from financing activities - -
9. Contingent liabilities
Checkit plc and HMRC have been in correspondence since early 2022 regarding
matters of input tax recoverability. The matter is ongoing and the substance
of discussions remains unchanged from the prior year. A statutory review of
the case is being conducted and management continue to disagree with HMRC's
position. Specialist tax advice has been sought throughout the correspondence.
The total amount of input tax claimed since VAT registration to 31 January
2023 is £1.2m. Given the uncertainty and materiality of the issue, we do not
consider it appropriate at this stage to provide for this and are disclosing
as a contingent liability.
10. Non-GAAP performance measures
A reconciliation of non-GAAP performance measures to reported results is set
out below:
Profit measures - LBITDA - continuing operations
2024 2023
£m £m
LBITDA (3.4) (6.4)
Depreciation and amortisation (1.3) (1.0)
Share based payment charge (0.2) (0.2)
Non-recurring or special items (0.2) (4.8)
Operating loss for the year (5.1) (12.4)
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