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RNS Number : 8566D Checkit PLC 12 September 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.
12 September 2024
Checkit plc
("Checkit", the "Company" or the "Group")
Half Year Results for the Six Months Ended 31 July 2024
Checkit plc (AIM: CKT), the automated monitoring platform for operational
leaders, announces its unaudited half year results for the six months to 31
July 2024 ("H1 FY25").
The Group's management team will host a live webinar which will include an
opportunity for questions at 12:00 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)
H1 FY25 HIGHLIGHTS
· Total Group bookings* grew by 38% to £1.2m (H1 FY24: £0.8m)
· Annual Recurring Revenue** ("ARR") grew by 9% to £13.8m (H1 FY24:
£12.6m), with sales performance partly held back by the non-renewal of low
margin non-core business
· Total Group revenues from continuing operations grew by 16% to £6.7m
(H1 FY24: £5.7m)
· Revenues remain sticky with net revenue retention*** ("NRR") of
109% and gross revenue retention ("GRR") of 95%
· Progress towards profitability remains on track, with adjusted
LBITDA**** from continuing operations improving by 24% to £1.4m (H1 FY24:
£1.9m) reflecting a continuing focus on cost management and efficiency
· Cash at half-year end was £7.0m (£12.8m at 31 July 2023 and £9.0m
at 31 January 2024). The Board remains confident that the Company's cash
resources are sufficient to support the path to profitability expected during
the year ending 31 January 2027.
· New product initiatives included the launch of the Asset Intelligence
module, based on AI and machine learning, integrating sensor networks,
workflows and analytics
Outlook
· Further progress has been made towards achieving the goal of hitting
profitability during the year to 31 January 2027 and the Board remains
confident of delivering market expectations for revenue and LBITDA for this
financial year
Kit Kyte, CEO of Checkit, commented: "The first half of the year has seen good
progress. We continue to drive growth through a subscription-based model and
strategic land and expand opportunities. The addition of Asset Intelligence to
our suite of products has been well received, with continued investment in the
development of the Checkit platform to create a market leading product. Market
conditions remain uncertain, but the Board is confident that Checkit is making
progress towards profitability in the year ending 31 January 2027."
NOTES
* Bookings are defined as the committed Annual Recurring Revenue ("ARR") of
new sales wins contracted during the period.
** 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 revenue retention ("NRR") is defined as the amount of recurring
revenue from existing customers retained over the year, excluding new wins in
the last 12 months. Gross revenue retention ("GRR") is defined as the amount
of recurring revenue from existing customers retained over the period,
excluding new wins or upsell / expansion in the period.
**** Adjusted LBITDA is the loss on operating activities before depreciation
and amortisation, share based payment charges and non-recurring or special
items. Analysts' expectations for FY25 are for revenue of £14.2m and adjusted
LBITDA of £2.3m.
The person responsible for releasing this announcement is Greg Price, Chief
Financial and Operations Officer of Checkit.
For further information, please visit https://www.checkit.net
(https://www.checkit.net) or contact:
Checkit plc +44 (0) 1223 643 313
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 / James Fischer
Tavistock (Financial PR) +44 (0) 20 7920 3150
Lulu Bridges / Katie Hopkins / Simon Hudson
CEO'S STATEMENT
Despite ongoing challenges in our principal markets, we recorded results and
operational performance in line with the Board's expectations in the first
half of the year. We again increased annual recurring revenue (ARR) and
revenues for the period and made further progress on the path to
profitability, demonstrated by another significant reduction in adjusted
LBITDA. This was achieved while pursuing our land and expand strategy to grow
in our targeted sectors and geographies and the half year contained some
important new contract wins. We have continued to invest in our customer
proposition with the launch of our innovative Asset Intelligence product
module.
During the period under review, we announced a possible all-share offer for
Crimson Tide plc. We withdrew our intention to make an offer following the
announcement by Crimson Tide that it had received a competing approach by a
third party at what we considered to be an uneconomic level. Crimson Tide
later announced that this third party had also informed them that it didn't
intend to make a formal offer. The cost of the discontinued bid is included
within exceptional items in these results.
The Board continues to believe, subject to the appropriate financial due
diligence, in the logic of value enhancing acquisitions to complement our
organic growth strategy.
Strategy
Our growth strategy remains unchanged and the first half of FY25 saw, once
again, successful execution against this strategy. The Group seeks to respond
to market demands globally for a comprehensive operations solution that is
data and analytics driven. This enables us to deliver insights that empower
our customers to make informed decisions. Checkit aims to become a leader in
augmented workflow management with a pure subscription-based model which
enhances our revenue predictability and strengthens our customer engagement.
We target addressable markets in the retail, healthcare,
facilities management, franchise and biopharma sectors, focused on the UK,
continental Europe and the US. In order to achieve market penetration, we
continuously invest in our platform, including its capacity to incorporate
external technologies, positioning us at the forefront of the market. Our
go-to-market tactics are centred around the organic growth concept of land and
expand but we will consider acquisition opportunities where we are convinced
that the business combination will deliver added shareholder value and provide
a shortcut to scale.
During the half year we recorded achievements in each facet of our growth
strategy, as set out below.
Financial performance
The first half of FY25 saw ARR grow by 9% to £13.8m (H1 FY24: £12.6m) and
revenues grow by 16% to £6.7m (H1 FY24: £5.7m), despite the continuing tough
conditions in our markets globally. Our revenues remain sticky with Gross
Retention Rates at 95%.
Adjusted LBITDA improved by 24% to £1.4m (H1 FY24: £1.9m). The reduction
reflects our continuing focus on cost management. The reduced loss and careful
cash management meant that we were able to end the period with cash balances
of £7.0m (£9.0m at 31 January 2024). The Board remains confident that the
Company's cash resources are sufficient to support the path to profitability
during the year ending 31 January 2027.
During the first half, our cost of sales increased as we established the
necessary infrastructure in New Zealand and Australia to service our biggest
contract to date with an integrated energy company. It is our policy to write
off the costs of equipment and installation at the outset of a contract.
Although there was a percentage point near term impact on our gross margin,
our disciplined approach means we have been successful in increasing our gross
margin overall by a further 1 percentage point to 68% compared to FY24. At the
same time, we have continued to reduce operating costs through tight
management of spend and operational efficiencies, whilst supporting staff with
cost-of-living increases.
During the period, we also successfully concluded our discussions with HMRC
regarding matters of input tax recoverability. HMRC has recognised that
Checkit was entitled to input VAT recovery throughout the period under
review, given it has demonstrated to HMRC's satisfaction its intention to
make taxable supplies of management services to its subsidiaries. HMRC's
original assessment has been cancelled and no further action will be taken.
The contingent liability reported in our annual report is now no longer
required. Unfortunately the costs of defending our position are not
recoverable from HMRC and these are included as exceptional items in our
P&L account.
Our net cash position remains strong at £7.0m which reflects the further 24%
reduction in losses in the first half on top of the 46% reduction in FY24.
Revenue growth continues
The success of our land and expand strategy and our ability to grow with our
customers is demonstrated by a 38% increase in first half bookings of £1.2m
compared to H1 FY24, a net revenue retention rate of 109%* and a gross revenue
retention rate of 95%*. Our retention rates have fallen marginally in the
first half due to the non-renewal of a non-core managed service for a large
retailer, and the expected loss of small, low margin hospitality customers who
are negatively impacted by on-going market conditions. Over 50% of ARR growth
resulted from upsell and cross sell within our current customer base, as
customers continue to see the productivity and efficiency benefits which the
Checkit platform enables, with the balance coming from new customer wins and
price increases.
* Net revenue retention ("NRR") is defined as the amount of recurring revenue
from existing customers retained over the period, excluding new wins in the
period. Gross revenue retention ("GRR") is defined as the amount of recurring
revenue from existing customers retained over the period, excluding new wins
or upsell / expansion in the period.
A breakdown of H1 FY25 revenue from continued operations is shown below.
Reported Revenue (£'m): Six months to
31 July 2024 31 July 2023 % Change
Actual Actual
ARR 13.8 12.6 9%
Revenue
Recurring 6.3 5.4 14%
Non-recurring 0.4 0.3 47%
Total Group 6.7 5.7 16%
Operations and new product development
We continue to focus our growth drive in the retail, healthcare, facilities
management, and biopharma markets and on increasing our presence in the US.
We have continued to enhance our product range and launched a new product
module, Asset Intelligence. This significant product development applies
advanced data analytics and Machine Learning to IoT data to enhance customer
sustainability, reduce costs and improve revenue. Asset Intelligence has been
designed to integrate sensor networks, workflows and analytics to provide
greater insights into the performance of a customer's assets. It analyses the
condition of monitored appliances to predict issues before they escalate
whilst providing greater visibility of asset performance and identifying
operational inefficiencies.
In June 2024, we announced that the first contract for Asset Intelligence had
been secured and through our upselling strategy, we are confident that
customers will recognise the value and efficiencies that the addition of this
integrated end-to-end module can provide.
In April 2024, we announced that we had signed a new contract with an
integrated energy company to provide real time operations management
capabilities to 50 franchisees in the UK worth £252,000 over three years and
we anticipated that this contract had the potential to expand to additional
sites over time. We were delighted when we were able to announce in July 2024
that this contract has been extended to a further 150 additional franchisee
sites in the UK worth a further £250,000 annually. The sites will be
installed in tranches over the duration of the 32-month contract. We remain
hopeful of signing similar contracts with this customer, covering additional
geographies, in the future.
At the same time we announced we had signed contracts with a combined value of
£165,000 over three years with a multinational outsourced food service
company for the provision of CAM and CWM products to end users in four
additional locations.
In June 2024, we announced a significant expansion of the Octapharma Plasma
contract in the US, worth £718,000 over three years. Octapharma will be
expanding its use of the Checkit platform by integrating Tactical Temperature
Monitoring Units (TTMU) into its existing monitoring system, further
protecting its operational data and mission-critical inventory. By leveraging
the TTMUs offline data logging capabilities, it will have complete data
redundancy across its entire network of plasma donation centres in the US. Our
focus on expansion in the US is proceeding to plan, with US ARR up 13% in the
first half.
Our vision is to reshape business performance through a combination of
automation and human intervention, delivering efficiencies and value to our
customers. We will continue to design solutions that integrate Internet of
Things (IoT) sensors, the digitisation of frontline work, and the application
of Artificial Intelligence (AI). Our data orchestration platform enables
operational excellence for our customers and transforms traditional, outdated
manual processes into streamlined digital solutions. The addition of the
Asset Intelligence module to our existing product offerings provides enhanced
predictability, further operational benefits and financial value to our
customers. We will continue to invest in product developments that enhance the
customer experience, improve retention rates and drive growth into new sectors
and geographies.
Outlook
We continue to drive growth through a pure subscription-based model that
provides good visibility of future revenue streams. We will continue to invest
in the development of the Checkit platform to create a market leading product.
Market conditions remain uncertain but we are confident that Checkit will make
further progress towards achieving its goal of hitting profitability in the
year ending 31 January 2027 and we remain on track to meet market revenue and
LBITDA expectations for the current year.
These results, and the progress we continue to make in the UK and the US,
reflect the talent, hard work and perseverance of the entire Checkit team. On
behalf of the Board, I thank all Checkit people for their efforts.
Kit Kyte
CEO
Consolidated statement of comprehensive income
unaudited interim results to 31 July 2024
Unaudited Unaudited Audited
Half year to Half year to Year to
31 July 31 July 31 January
2024 2023 2024
£m £m £m
Revenue (Note 2) 6.7 5.7 12.0
Cost of sales (2.2) (1.8) (4.0)
Gross profit 4.5 3.9 8.0
Operating expenses (5.9) (5.8) (11.4)
Adjusted LBITDA* (1.4) (1.9) (3.4)
Depreciation and amortisation (0.8) (0.6) (1.3)
Share-based payment charge (0.1) (0.2) (0.2)
Non-recurring or special items (Note 3) (0.4) - (0.2)
Operating loss (2.7) (2.7) (5.1)
Finance income - 0.2 0.5
Loss before taxation (2.7) (2.5) (4.6)
Taxation (Note 4) 0.1 0.1 0.1
Loss for the period attributable to equity shareholders (2.6) (2.4) (4.5)
Other comprehensive income
Exchange differences on translation of foreign operations - - -
Total other comprehensive income - - -
Total comprehensive expense for the period attributable to equity shareholders (2.6) (2.4) (4.5)
Loss per share (Note 6)
Continuing (2.4)p (2.3)p (4.2)p
The accompanying notes form an integral part of this consolidated interim
financial information.
* Adjusted loss before interest, tax, depreciation and
amortisation "LBITDA" is calculated by taking operating profit and adding back
depreciation and amortisation, share-based payment charges and non-recurring
or special items.
Consolidated balance sheet
unaudited at 31 July 2024
Unaudited Unaudited Audited
31 July 31 July 31 January
2024 2023 2024
£m £m £m
Assets
Non-current assets
Goodwill arising on acquisition 0.2 0.2 0.2
Other intangible assets 5.4 4.3 4.8
Property, plant and equipment 0.7 0.8 0.8
Total non-current assets 6.3 5.3 5.8
Current assets
Inventories 4.1 3.4 3.8
Trade and other receivables 3.7 3.1 4.5
Cash and cash equivalents 7.0 12.8 9.0
Total current assets 14.8 19.3 17.3
Total assets 21.1 24.6 23.1
Current liabilities
Trade and other payables 8.5 7.0 7.8
Lease liabilities 0.1 0.2 0.2
Total current liabilities 8.6 7.2 8.0
Non-current liabilities
Long-term provisions 0.2 0.4 0.2
Lease liabilities 0.2 0.3 0.3
Deferred tax - - -
Total non-current liabilities 0.4 0.7 0.5
Total liabilities 9.0 7.9 8.5
Net assets 12.1 16.7 14.6
Equity attributable to equity holders of the parent
Called-up share capital 5.4 5.4 5.4
Share premium 23.3 23.3 23.3
Capital redemption reserve 6.4 6.4 6.4
Other reserves 0.6 0.5 0.5
Retained earnings (23.6) (18.9) (21.0)
Total equity 12.1 16.7 14.6
The accompanying notes form an integral part of this consolidated interim
financial information.
Consolidated statement of changes in equity
unaudited interim results to 31 July 2024
Share Share Capital Other Retained Total
capital premium redemption reserves earnings £m
£m £m reserve £m £m
£m
At 1 February 2023 5.4 23.3 6.4 0.3 (16.5) 18.9
Loss for the period - - - - (2.4) (2.4)
Total comprehensive expense for the period - - - - (2.4) (2.4)
Share-based payments - - - 0.2 - 0.2
Transactions with owners - - - 0.2 - 0.2
At 31 July 2023 5.4 23.3 6.4 0.5 (18.9) 16.7
Loss for the period - - - - (2.1) (2.1)
Total comprehensive expense for the period - - - - (2.1) (2.1)
Issue of new shares - - - - - -
Transactions with owners - - - - - -
At 1 February 2024 5.4 23.3 6.4 0.5 (21.0) 14.6
Loss for the period - - - - (2.6) (2.6)
Total comprehensive expense for the period - - - - (2.6) (2.6)
Share-based payments - - - 0.1 - 0.1
Transactions with owners - - - 0.1 - 0.1
At 31 July 2024 5.4 23.3 6.4 0.6 (23.6) 12.1
The accompanying notes form an integral part of this consolidated interim
financial information.
Consolidated statement of cash flows
unaudited interim results to 31 July 2024
Unaudited Unaudited Audited
Half year to Half year to Year to
31 July 31 July 31 January
2024 2023 2024
£m £m £m
Net cash flows from operating activities
Loss before taxation (2.6) (2.5) (5.1)
Adjustments for:
Depreciation 0.2 0.2 0.4
Amortisation 0.6 0.4 1.0
Finance income - (0.2) -
Share based payments 0.1 0.2 0.2
Operating cash flows before working capital changes (1.7) (1.9) (3.5)
Decrease in trade and other receivables 0.9 1.4 0.1
Increase in inventories (0.3) (1.0) (1.4)
Increase/(decrease) in trade and other payables 0.7 (0.5) 0.3
Operating cash flows after working capital changes (0.4) (2.0) (4.5)
Increase in provisions (0.1) - (0.2)
Cash used in operations (0.5) (2.0) (4.7)
Tax credit received - 0.1 -
Net cash outflows from operating activities (0.5) (1.9) (4.7)
Investing activities
Interest received on bank deposits - 0.2 0.5
Purchase of property, plant and equipment (0.2) (0.1) (0.1)
Investment in product development projects (1.2) (0.9) (2.0)
Net cash used in investing activities (1.4) (0.8) (1.6)
Financing activities
Repayment of contract lease liabilities (0.1) (0.1) (0.3)
Net cash (used in)/generated by financing activities (0.1) (0.1) (0.3)
Net (decrease)/increase in cash and cash equivalents (2.0) (2.8) (6.6)
Cash and cash equivalents at the beginning of the period 9.0 15.6 15.6
Cash and cash equivalents at the end of the period 7.0 12.8 9.0
The accompanying notes form an integral part of this consolidated interim
financial information.
Notes to the unaudited interim results
to 31 July 2024
1. Accounting policies
The unaudited interim Group financial information is for the six months ended
31 July 2024 and does not comprise statutory accounts within the meaning of
S.435 of the Companies Act 2006. The unaudited interim Group financial
statements have been prepared in accordance with the AIM rules. This report
should be read in conjunction with the Group's Annual Report and Accounts for
the year ended 31 January 2024, which have been prepared in accordance with
UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. Fixed annual charges are apportioned to the interim
period on the basis of time elapsed. Other expenses unless disclosed otherwise
are accrued in accordance with the same principles used in the preparation of
the annual accounts.
During the period, the Directors reviewed estimates in relation to the timing
of revenue recognition and concluded these estimates were too prudent by
reference to actual outcomes regarding the commencement dates of new contracts
and the specific installation tasks to be completed. From 1 February 2024 the
directors have therefore applied a revised method with increased reference to
experience. This has been treated as a change in accounting estimate and has
had an immaterial effect on the financial statements for the period ended 31
July 2024.
2. Segmental reporting
Revenues
The following table presents the different revenue streams of Checkit:
Half year to Half year to Year to
31 July 31 July 31 January
2024 2023 2024
£m £m £m
Recurring revenues from subscription services 6.3 5.4 11.2
Consultancy and other services 0.4 0.3 0.8
Total 6.7 5.7 12.0
The Group considers its operations to be in the following geographical
regions:
Geographic Half year to Half year to Year to
31 July 31 July 31 January
2024 2023 2024
£m £m £m
United Kingdom 4.6 4.1 8.9
The Americas 1.8 1.5 3.1
Rest of World 0.3 0.1 -
Total 6.7 5.7 12.0
Revenue expected to be recognised
The Group expects to recognise revenue amounting to £4.7m (H1 FY24: £3.4m)
relating to performance obligations from existing contracts that are
unsatisfied or partially satisfied as at 31 July 2024. This is reported within
"Trade and other payables" on the balance sheet.
3. Non-recurring or special items
Non-recurring or special items are disclosed separately to improve visibility
of the underlying business performance.
Management has defined such items as costs associated with the acquisition or
disposal of businesses, restructuring, impairment of goodwill, amortisation of
acquired intangible assets and other non-recurring items incurred outside the
normal course of business.
Half year to Half year to Year to
31 July 31 July 31 January
2024 2023 2024
£m £m £m
Cash items
Tax advice for HMRC VAT recoverability 0.2 - -
Restructuring and integration costs 0.2 - 0.1
0.4 - 0.1
Non-cash items
Amortisation of acquired intangible assets - - 0.1
- - 0.1
Total non-recurring or special items 0.4 - 0.2
4. Taxation
The tax credit on the loss from continuing operations before taxation has been
estimated at £0.1m (H1 FY24: £0.1m; FY24: £0.1m). The Group has in excess
of £32m of tax losses carried forward.
5. 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 period
attributable to equity shareholders divided by the weighted average number of
shares in issue during the period.
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. However, in this case, as set out in IAS 33, the
potential ordinary shares cannot be treated as dilutive as their conversion to
ordinary shares would decrease loss per share from continuing operations,
resulting in basic and diluted measures being the same.
Key 31 July 31 July 31 January
2024 2023 2024
Million Million Million
Weighted average number of ordinary shares for the purposes of basic earnings A 108.0 108.0 108.0
per share
(Loss)/earnings for the period Key 31 July 31 July 31 January
2024 2023 2024
Million Million Million
Loss for the period B (2.6) (2.4) (4.5)
Loss from discontinued operations, net of tax C - - -
Continuing loss for the period D (2.6) (2.4) (4.5)
Total non-recurring or special items net of tax 0.3 - 0.1
Continuing loss adjusted for EPS E (2.3) (2.4) (4.4)
Key 31 July 31 July 31 January
2024 2023 2024
Continuing EPS measures
Basic and diluted D/A (2.4)p (2.3)p (4.2)p
Adjusted continuing EPS measures
Basic and diluted E/A (2.2)p (2.3)p (4.1)p
Discontinued EPS measures
Basic and diluted (C)/A - - -
Total EPS measures
Basic and diluted B/A (2.4)p (2.3)p (4.2)p
6. Cautionary statement
This interim financial information has been prepared only for the shareholders
of Checkit plc as a whole and its sole purpose and use is to assist
shareholders to exercise their governance rights. Checkit plc and its
Directors and employees are not responsible for any other purpose or use or to
any other person in relation to this report.
The report contains indications of likely future developments and other
forward-looking statements that are subject to risk factors associated with,
among other things, the economic and business circumstances occurring from
time to time in the countries, sectors and business segments in which the
Group operates. Key risks and their mitigation have not changed materially in
the period from those disclosed on pages 32 to 35 of the annual financial
statements for the year ended 31 January 2024.
These and other factors could adversely affect the Group's results, strategy
and prospects. Forward-looking statements involve risks, uncertainties and
assumptions. They relate to events and/or depend on circumstances in the
future which could cause actual results and outcomes to differ materially from
those currently anticipated. No obligation is assumed to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
7. Other information
The financial information in this statement does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act 2006. The
financial information in respect of the year ended 31 January 2024 has been
extracted from the statutory accounts, which have been filed with the
Registrar of Companies. The independent auditor's report on those accounts was
unqualified and did not contain a statement under Sections 498(2) or 498(3) of
the Companies Act 2006.
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