REG - Eagle Eye Sol Gp PLC - Half Year Results
14/03/2023 07:00
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RNS Number : 8194S Eagle Eye Solutions Group PLC 14 March 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE
EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"). UPON PUBLICATION OF THIS
ANNOUNCEMENT THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC.
14 March 2023
Eagle Eye Solutions Group plc
("Eagle Eye", the "Group", or the "Company")
Half Year Results for the six months ended 31 December 2022
Strong organic growth and acquisition of Untie Nots supports continued
expansion
Eagle Eye, a leading SaaS technology company that creates digital connections
enabling personalised, real-time marketing through coupons, loyalty, apps,
subscriptions and gift services, is pleased to announce its unaudited interim
results for the six months ended 31 December 2022 (the "Period").
Financial Highlights
H1 2023 H1 2022 Change
Group revenue £20.0m £15.1m +32%
Recurring subscription and transaction revenue £15.7m £11.5m +37%
Recurring revenue % of Group revenue 78% 76% +2ppt
Period end Annual Recurring Revenue(1) £26.2m £18.9m +38%
Net Revenue Retention(2) 127% 130% -3ppt
Gross profit £18.8m £14.0m +35%
Adjusted EBITDA(3) £4.7m £3.1m +50%
Adjusted EBITDA margin 23.5% 20.8% +2.7ppt
Profit before tax £0.9m £0.6m +48%
Adjusted net cash(4) at 31 December £5.7m £1.8m +216%
(1) Period end Annual Recurring Revenue ("ARR") is defined as period exit rate
for recurring AIR subscription and transaction revenue plus any professional
services contracted for more than 12 months hence and secured new wins,
excluding any seasonal variations and lost contracts.
(2) Net Revenue Retention ("NRR") rate is defined as the improvement in
recurring AIR revenue excluding new wins in the last 12 months.
(3) EBITDA has been adjusted for the exclusion of share-based payment charges
along with depreciation, amortisation, interest and tax from the measure of
profit, along with costs of the acquisition of Untie Nots in FY23
(4) Adjusted net cash is defined as cash and cash equivalents less financial
liabilities and excludes the placing proceeds associated with the acquisition
of Untie Nots which were paid out following completion on 3 January 2023.
Operational Highlights
· Strong revenue growth at 32% as the Group continues to deliver on
its customer strategy: Win, Transact and Deepen
o New international Wins include a Canadian retailer and IKEA Taiwan
o Transaction and subscription revenue growth with the Woolworths Group
contract in Australia reaching full-scale, the full go-live of a large grocer
in the U.S., and the national rollout of Asda's loyalty programme
o Ongoing deepening of engagements across our customer base
· Group benefitting from the strength of its SaaS business model
o ARR up 38% to £26.2m, NRR remains high at 127% and churn remains low,
providing a strong basis for continued expansion
· Delivering increasing profit margins and cash inflow
o 50% increase in adjusted EBITDA to £4.7m and an increased adjusted EBITDA
margin of 23.5%, reflecting strong revenue growth and careful management of
the cost base, whilst still investing in product and sales & marketing
o Net cash inflows before financing of £2.4m in H1 2023, a 117% increase on
H1 2022
· International expansion continues with investment in Singapore,
Germany and North America
o Strong growth in international revenue in the Period, driven by North
America and APAC
o Increased sales and marketing initiatives to continue to drive our win
rate
· Earnings accretive acquisition of Untie Nots providing expanded
growth opportunities
o Successful acquisition of Untie Nots, a high growth France based SaaS
business, completed in January 2023, with a number of joint customer
discussions already underway and integration progressing as planned
Outlook - current year performance ahead of expectations
· Entered the second half of the financial year in a strong
position, with the continued growth in ARR providing good visibility on
sustainable profitable growth
· Combined sales & marketing with Untie Nots is delivering
increased pipeline opportunities
· Trading since the Period end has continued to be strong,
providing the Board with confidence in delivering another year of profitable
growth, with revenue and adjusted EBITDA for the year ended 30 June 2023 now
expected to be comfortably ahead of current market expectations*
Tim Mason, Chief Executive of Eagle Eye, said: "Our strong performance over
the last six months reflects the continued relevance of our loyalty and
promotions platform at a time when digital engagement with consumers has never
been more important. We have continued to grow our customer base and deepen
customer engagements around the world, proving our position as a leader in
digital engagement for tier-1 retail.
"We were delighted to complete our first acquisition in January 2023, bringing
the talented Untie Nots team into the business. Separately, we have both been
growing rapidly. Together, we are significantly stronger. I am encouraged by
the initial conversations with major retailers around the world, which
provides incremental opportunities for the Group.
"While we are conscious of the challenging economic backdrop, the strength of
our SaaS business model, along with a healthy new business pipeline, growing
international presence and supportive market drivers, underpins the Board's
confidence in delivering another year of profitable growth."
*In so far as the Company is aware, market consensus at the date of this
announcement for the year ending 30 June 2023 is for Revenue of £37.8m, and
Adjusted EBITDA of £7.5m.
The person responsible for the release of this announcement on behalf of the
Company for the purposes of MAR is Lucy Sharman-Munday, Chief Financial
Officer.
Enquiries:
Eagle Eye Solutions Group plc Tel: 0844 824 3686
Tim Mason, Chief Executive Officer
Lucy Sharman-Munday, Chief Financial Officer
Investec Bank plc (Nominated Adviser & Joint Broker) Tel: +44 20 7597 5970
Corporate Broking & PLC Advisory: David Anderson, Nick Prowting
Shore Capital (Joint Broker) Tel: +44 20 7408 4090
Corporate Advisory: Daniel Bush, David Coaten, Lucy Bowden
Corporate Broking: Henry Willcocks
Alma PR (Financial PR) Tel: +44 20 3405 0205
Caroline Forde, Hannah Campbell
About Eagle Eye
Eagle Eye is a leading SaaS technology company transforming marketing by
creating digital connections that enable personalised performance marketing in
real time through coupons, loyalty, apps, subscriptions and gift services.
Eagle Eye AIR enables the secure issuance and redemption of digital offers and
rewards at scale, across multiple channels, enabling a single customer view.
The Group creates a network between merchants, brands and audiences to enable
customer acquisition, interaction and retention at lower cost whilst driving
marketing innovation.
The Company's current customer base comprises leading names in UK Grocery,
Retail, Leisure and Food & Beverage sectors, including Asda, Sainsbury's,
Tesco, Waitrose and John Lewis & Partners, Virgin Red, JD Sports, Pret A
Manger, Greggs, Mitchells & Butlers, PizzaExpress; in North America,
Loblaws, Shoppers Drug Mart, Southeastern Grocers and Staples US Retail and in
Australia & New Zealand, Woolworths Group and The Warehouse Group. In
January 2023, the Group acquired France based Untie Nots, a personalised
promotions business, adding Carrefour, E. Leclerc, Auchan and other leading
brands to its European customer base.
Web - www.eagleeye.com (http://www.eagleeye.com/)
Strategic Report
Overview
We are pleased to report on another period of strong profitable growth.
Through the proven capabilities of our AIR platform and the drive and
commitment of our team, we remain at the forefront of the digital
transformation taking place across the world of retail marketing.
We continued to deliver across all three areas of our customer strategy - Win,
Transact and Deepen in all of our target geographies during the Period, with
highlights including the full go-live of the five-year contract with
Woolworths Group, the largest retailer in Australia, the national rollout of
Asda's new loyalty programme in the UK, and the winning of a substantial
Canadian retailer and IKEA in Taiwan, alongside the continued deepening of
engagements with our customers in North America.
The success of our strategy is evident in the revenue growth of 32%, to
£20.0m (H1 FY22: £15.1m), and 50% increase in adjusted EBITDA to £4.7m (H1
FY22: £3.1m). Importantly, we continue to benefit from low customer churn and
high levels of annual recurring revenue, which alongside our increasing levels
of cash generation provides us with confidence to continue to carefully invest
to support our future growth.
Acquisition of Untie Nots
On 3 January 2023, post Period end, we successfully completed the acquisition
of Untie Nots, a high-growth SaaS company that enables retailers to develop
highly personalised, profitable, and gamified promotions at scale,
strengthening the opportunity for both businesses. Untie Nots' customer list,
including Carrefour, Leclerc and Auchan, and strong financial metrics speak to
the quality of the business and, as a Group, we are looking forward to
unlocking the considerable growth opportunity this acquisition will bring. On
behalf of the Board, I would like to thank both new and existing shareholders
for their support in making this acquisition possible.
At a time when retailers are accelerating their digital promotions activities
to retain and grow their customer bases, we believe Untie Nots' technology
will resonate across our customer base and pipeline. The acquisition provides
us with accelerated entry into the French digital promotions market, brings
some of Europe's largest grocers into the Group, adds to our growing roster of
US clients and provides a wealth of cross-sale opportunities.
Untie Nots is a well-managed business and will continue to be run by its
founders as a separate company, while benefiting from initial synergies
including cloud hosting costs and the support of our more extensive sales and
marketing expertise and strong customer network.
I am pleased to report that joint customer conversations are already underway
with initial feedback from customers and prospects supporting our positive
view of the potential of the joint approach.
Growing market opportunity
Never has digital engagement with consumers been of more relevance, with
retailers of all kinds developing their omnichannel capabilities to address
rapidly changing consumer shopping behaviours.
The retail industry is also becoming increasingly aware that data driven,
personalised promotions are one of the most effective ways to drive increased
trade and retain customer loyalty.
We recently carried out a consumer survey across the UK, North America and
Asia Pacific, with the following findings:
· As a result of the higher cost of living, 53% of respondents
actively seek out items for which there is an offer or promotion available;
· 84% of consumers believe receiving more personalised
recommendations should help them save money; and
· 67% of consumers using grocery reward programmes are using them
more.
Meanwhile, our survey of retail businesses found that 65% of loyalty programme
managers say their membership has grown over the past 12 months, citing the
economic situation as the main driver for growth and 82% of companies have
invested in their loyalty programme's technology during 2022 and plan to do so
even more in 2023.
A reflection of the growing prominence of loyalty in the retailers' marketing
toolkit can be seen in a recent Q1 Trading Update webcast from Woolworth's
Group, the largest retailer in Australia. Commenting on the increased
engagement through Woolworth's loyalty programme, CEO Brad Banducci said,
"there's a mega trend going on globally right now and it's primarily enabled
through apps and capabilities like Eagle Eye…it's a space that I think will
continue to evolve and we need to continue to evolve with it".
With high profile discussions around loyalty and the AIR platform such as this
taking place, we expect the shift towards digitisation and personalisation to
continue to accelerate in the face of tougher economic times for consumers and
for Eagle Eye to be a beneficiary of that acceleration.
Delivering against our growth strategy
I am pleased to report good progress across our growth strategy during the
first half of the financial year:
1. "Win, Transact and Deepen"
- 'Win': bring more customers on to the Eagle Eye AIR platform;
- 'Transact': drive higher redemption and interaction volumes through
the platform; and
- 'Deepen': encourage our customers to adopt more of our product
portfolio as they become more adept at digital marketing.
Win
The Group delivered a steady level of "Win" related revenue in the Period,
with new customers secured including a multi-year loyalty contract with a
large retailer in Canada, and smaller contracts with a range of retailers,
such as Hobbycraft UK. Post Period end, we were also pleased to secure our
second IKEA subsidiary, signing IKEA Taiwan, following the win with IKEA
Indonesia in the prior year, a subsidiary of DFI Retail Group, the leading
pan-Asian retailer.
We have recently introduced a range of initiatives to increase our win rates,
including: the acquisition of Untie Nots, which provides a quicker 'win'
product; a partnership with Google Cloud, providing an additional source of
leads; and increased investment in our marketing activity. As a result, we are
seeing an improved level of leads in the pipeline.
Our customer-first ethos also means that we are increasingly seeing a large
proportion of our Wins coming from customer referrals, demonstrating the value
of our efforts to ensure we delight our customers, and we expect this trend to
continue.
Our high level of customer retention means that each new customer win
significantly adds to our growth prospects, through expanding the use of the
platform and the addition of new services.
Transact
Chargeable AIR redemption and interaction volumes, a key measure of usage of
Eagle Eye AIR, increased by 147% to 1,570m (H1 2022: 635m).
A significant contributor to this growth was the further roll-out of the large
U.S. grocer won in partnership with Neptune Retail Solutions 2021, which went
live in May 2022. Cosmos, now part of JD Sports, went live in Greece with
their loyalty programme, launching gift cards with Sprinter in Portugal,
Spain, Netherlands, France and Italy. We have now renewed our contract with JD
Sports until the end of 2025.
We also saw the benefit of the significant Woolworths Group "Real-Time
Loyalty" programme in Australia going fully live, with full point-of-sale
integration taking place from August 2022. In its H1 FY23 results update,
Woolworths shared that the number of members in the Everyday Rewards programme
had risen to 14.1 million, a 6% increase on the previous year. Member
engagement had also reached record levels with a 57% increase in active weekly
app users vs. H1 FY22. Woolworths CEO, Brad Banducci, discussed the
importance of their loyalty programme and described the capabilities being
driven by the Eagle Eye AIR platform, highlighting the real-time capabilities
of the platform and the flexibility around variance of offers, commenting:
"It's Eagle Eye, for those interested in the tech…a next-generation loyalty
platform. And it can be instantaneous. It can reconcile full history. And it's
not constrained in terms of the offers we can provide or how we can repurpose
it, so we have an incredibly powerful platform."
Deepen
A key focus during the half was on deepening our engagements with existing
customers and this success is reflected in the continued strong NRR of 127%
(H1 FY22: 130%).
We have experienced a significant increase in interest in our promotion and
loyalty offerings as the cost of living crisis continues to tighten household
budgets and retailers look for ways to retain their own customers.
Highlights in the period include the national rollout of the Asda loyalty
programme, and further deepening of our engagements with Staples US Retail who
moved from a single user case pilot to a multi-channel loyalty programme.
We also deepened our partnership with Mitchells & Butlers through the
launch of its Staff Rewards app as well as an app targeting suppliers,
providing discounts at venues across the UK.
Pleasingly, our long-term contract customer churn rate by value remains
low at 0.0% (H1 2022: 0.0%), with good levels of renewals taking place.
2. Innovation
Innovation continues to lie at the heart of our proposition, investing in the
capabilities of Eagle Eye AIR to ensure that our technology continues to
enrich the lives of our customers, and their consumers. We have continued to
invest in innovation, and for the first time, this includes achieving
innovation through acquisition - though not solely.
Gamification
Out-of-the box solution
Following the acquisition of Untie Nots, Eagle Eye can now offer retailers an
end-to-end gamified solution, where end customers complete 'Challenges' that
are hyper-personalised continuity promotions designed to increase frequency
and spend, found to have between 5-10x higher customer participation versus
digital coupons, and offering a proven high retailer and brand ROI.
The solution offers built in data analytics with an AI and Machine
Learning-powered personalisation engine, without requiring a POS integration
and can be launched in as quick as 5 weeks.
Quest Campaigns
During the period we launched Quest campaigns that build more fun into the
shopping experience and reward consumers for completing a series of objectives
which leads to them achieving a quest. Objectives within each quest can be
unrelated and the POS integration allows for progress to be updated in
real-time. A quest campaign would usually form part of a wider loyalty
proposition.
Both gamified capabilities unlock new revenue streams with suppliers and focus
on driving frequency and growing spend. These are becoming core tactics within
overall customer engagement strategies, as already proving to be the case for
some of our key clients.
Speed
We have continued to enhance the speed of POS Connect in the period. POS
Connect enables our clients to deliver highly personalised offers at scale
without relying on their existing infrastructure. As a result of this work,
POS Connect response times have improved - for a basket with 50 items by 46%
and a basket with 200 items by 66%.
API Documentation
We have added a host of new API guides and best practices to our developer
portal, making Eagle Eye AIR a more developer friendly platform with the
necessary information required to integrate with Eagle Eye AIR on a self-serve
basis.
3. International Growth
The benefits of our investment into international expansion are becoming
increasingly evident, with the deepening of our clients' engagements in the US
and Australia, and initial customers secured in Southeast Asia. As a result,
we have seen significant revenue growth from North America and APAC in the
period.
Activity in the Period included our initial investments into Singapore and
Germany and investment in additional direct sales resource in North America,
targeting the considerable US promotions and loyalty market.
Marketing activities in international regions have stepped up in the period to
support the sales resource investment that has had been made in these regions.
Investment has been made into lead generation campaigns to drive more inbound
leads into the sales pipeline as well as an events programme that included
breakfast briefings with major retailers in Singapore, Thailand and Malaysia
and sales outreach to set up meetings at NRF, the most influential retail
conference in USA, that was held in January 2023. Eagle Eye also joined key
trade associations including FMI, Australian Loyalty Association and NRF to
raise awareness amongst loyalty professionals and increase networking
opportunities. These activities have led to a considerable increase in leads
compared to H1 FY22.
We are also greatly encouraged by the initial marketing activities being
carried out with Untie Nots, individually and jointly, building the pipeline
both in the UK but predominantly internationally, with great logos as we had
hoped. We are now actively focused on the conversion of this growing pipeline,
which we anticipate will have shorter sales cycles than our typical more
complex full loyalty programme discussions.
4. "Better, Simpler, Cheaper"
While investing in innovation and growing the business, we simultaneously look
for inherent productivity and efficiencies coming from the scale of what we
do. We have developed a proven business model to grow our EBITDA margin whilst
also investing, as we 'Win', in sales & marketing and enhancements to the
product to generate new opportunities for growth. The success of this
approach can be seen in our growing EBITDA margin, which reached 23.5% in the
Period.
Our net people costs represent 55% of the operating costs of the business in
the Year (H1 FY22: 59%) and we recognise they are our biggest asset. We will
see further cost base expansion in the second half, largely as a result of
salary increases, which is supported by our model.
A key focus of our Better, Simpler, Cheaper approach in the second half will
be making our sales and marketing team and processes available to the Untie
Nots team, meaning they will not have to build their own activity from
scratch. This includes messaging and introductions to each other's clients and
prospects, utilising sales and marketing CRM and marketing automation systems,
content development for lead generation and joint participation at trade
shows.
ESG
Creating value for our customers sits at the heart of Eagle Eye, which we
believe is the foundation of our successful business. As part of this, we have
high ESG standards focused on materiality and making a difference.
Core areas of activity in the Period have centred around our People, with the
roll out of our Purple Pathways initiative, which has seen every team member
who wants it being supported in the development of their own career pathway at
Eagle Eye.
At the Q4 2022 Best Companies awards ceremony in November 2022, Eagle Eye were
delighted to be ranked in the Top 10 Technology companies to work for and in
the Top 20 list of overall UK companies. We increased our Best Companies
Index score from the survey in March 2022 and maintained our 3-star
accreditation, which is the highest accolade and awarded to companies who
demonstrate world class levels of employee engagement.
After more than 12 years with the Company, long-standing Non-Executive
Director and founding external shareholder, Bill Currie, steps down from the
Board today. We are incredibly grateful for all the support and guidance he
has provided in his time with Eagle Eye and wish him the very best. We have
commenced the recruitment of a new Non-Executive Director and will be aiming
to increase the diversity of our Board with this appointment, to reflect the
diversity of our team and customer base.
Financial Review
Key performance indicators H1 2023 H1 2022
Financial £'000 £'000
Revenue 20,015 15,112
Recurring revenue
Percentage of licence revenue 7,410; 37% 5,699; 38%
Percentage of AIR transaction revenue 6,973; 34% 4,584; 30%
Percentage of SMS transaction revenue 1,311; 7% 1,205; 8%
Total recurring revenue 15,694; 78% 11,489; 76%
Adjusted EBITDA(1) 4,703 3,138
Adjusted EBITDA(1) margin 23.5% 20.8%
Profit before tax 855 578
Adjusted net cash(2) 5,694 1,802
Cash and cash equivalents 14,409 2,202
Short term borrowings (2,000) (400)
Net placing proceeds 6,715 -
Non-financial
Chargeable AIR redemption and interaction volumes 1,569.5m 635.0m
Long term contract customer churn by value 0.0% 0.0%
( )
(1) Adjusted EBITDA excludes share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit, along
with costs of the acquisition of Untie Nots SAS in FY23
(2) Adjusted net cash is cash and cash equivalents less borrowings and
excludes Placing proceeds associated with the acquisition of Untie Nots which
were paid out following completion on 3 January 2023
Revenue and gross profit
During the Period, the Group delivered strong revenue growth of 32% to £20.0m
(H1 2022: £15.1m), particularly driven by growth in international revenues.
Revenue generated from recurring subscription fees and transactions over the
network represented 78% (H1 2022: 76%) of total revenue for the Period. This
growth was driven primarily through the North American business where revenue
increased by 156% to £7.4m (H1 2022: £2.9m) due to new client 'go lives' in
the Period, such as the major grocer won in association with Neptune and Giant
Eagle, which went live in the period, and continued deepening of existing
clients such as Loblaw. Outside of North America, revenue growth was primarily
driven by the transaction volume expansion of the Woolworths service and the
adoption of loyalty by Asda, in addition to its existing promotion services.
Professional services revenue increased by 19% to £4.3m (H1 2022: £3.6m). In
addition to growth in implementation fees in the EMEA region primarily from
Asda Loyalty, recent new wins such as Ikea Indonesia and Endeavour drove
growth in the APAC region.
Under IFRS 15, a SaaS business will typically recognise revenue (including
implementation revenue from professional services) over time. In some cases,
implementation revenue is now recognised over the period the service is live.
Therefore, during the period of implementation for a new client, which is
typically between two and six months, no revenue will be recognised, although
directly attributable associated costs are also spread over this period,
matching revenue and costs. Revenue from professional services that has been
deferred into future periods, but delivered and billed, was £4.3m at 31
December 2022 (31 December 2021: £1.8m).
The Group's Annual Recurring Revenue ("ARR"), which is our period exit rate
for recurring AIR subscription and transaction revenue plus any professional
services contracted for more than 12 months hence and secured new wins,
excluding any seasonal variations and lost contracts, increased by 38% to
£26.2m (H1 2022: £18.9m). The growth rate is broadly in line with recurring
AIR revenue growth of 40% due to the level of transactions now being generated
by Woolworths, Asda's loyalty solution and our grocer won in association with
Neptune, versus the comparative period.
The Group has maintained its strong Net Revenue Retention ("NRR") rate, which
is the improvement in recurring AIR revenue excluding new wins in the last 12
months. NRR for the period is 127% (H1 2022: 130%) with the slight reduction
reflecting the covid recovery impact seen in the H1 2022 comparative, when NRR
for the hospitality sector and those retail clients who had closed during the
COVID-19 related lockdowns increased by 23% compared with 12% in H1 2023.
Chargeable AIR redemption and interaction volumes, a key measure of usage of
the AIR platform, increased by 147% to 1,569.5m (H1 2022: 635.0m), primarily
on the back of successful increased activity by our grocer clients in all
regions.
Gross profit grew 35% to £18.8m (H1 2022: £14.0m) with gross margin
increasing to 94% (H1 2022: 93%). The change in gross margin reflects the
impact of the lower margin SMS business. SMS revenue increased by 8% to £1.3m
(H1 2022: £1.2m) but, as the AIR business was successfully grown at a faster
rate, it fell as a share of total revenue to 7% (H1 2022: 8%). AIR margin was
maintained at 98% (H1 2022: 98%). Cost of sales includes the cost of sending
SMS messages, revenue share agreements and outsourced bespoke development
work. All internal resource costs are recognised within operating costs, net
of capitalised development and contract costs.
Adjusted operating expenses and EBITDA
Continued control over operating expenses, which saw them increase by 30%,
behind the gross profit increase of 35%, has seen adjusted EBITDA grow by 50%
to £4.7m (H1 2022: £3.1m). To provide a better guide to the underlying
business performance, adjusted EBITDA excludes share-based payment charges
along with depreciation, amortisation, interest and tax from the measure of
profit. In H1 2023 it also excludes costs incurred in relation to the
acquisition of Untie Nots, completed on 3 January 2023.
The GAAP measure of operating profit before interest and tax increased 43% to
£0.9m (H1 2022: £0.6m), reflecting the growth in EBITDA partially offset by
higher share-based payment charges and the costs associated with the
acquisition of Untie Nots of £1.1m.
Adjusted operating expenses increased to £14.1m (H1 2022: £10.9m) as the
business has invested in line with our planned growth investment model.
Headcount has risen from an average of 162 in FY 2022 to 211 at 31 December
2022, resulting in an increase in net staff costs, which represent 55% of
adjusted operating costs (H1 2022: 59%) to £7.8m (H1 2022: £6.4m). This also
reflects the impact of annual pay awards and increased performance related
bonuses. IT infrastructure costs increased slightly ahead of the 37% rate of
recurring revenue growth, up 43% to £4.1m (H1 2022: £2.9m) as we invested in
the platform to enhance its speed, stability and security. Other operating
costs (excluding those related to the acquisition of Untie Nots), which are
either discretionary or are not correlated to changes in revenue, were £2.2m
(H1 2022: £1.6m), as the Group has increased its spend on marketing to take
advantage of the changing landscape and increased investment in travel as
Covid restrictions have been relaxed, allowing us to build stronger
relationships face to face with both existing and prospective clients. With
the acquisition of Untie Nots, investment into supporting the growth of the
business, and continued increased inflation rates, we anticipate that costs
will continue to increase in H2 2023 but we are ensuring that we retain
flexibility to address this in a controlled manner, in line with our
investment model.
We have continued to invest in the Product where total spend in the Period was
£3.1m (H1 2022: £2.4m). Capitalised product development costs were £1.1m
(H1 2022: £1.1m) whilst amortisation of capitalised development costs was
£1.0m (H1 2022: £1.1m). Contract costs (including costs to obtain contracts
and contract fulfilment costs), recognised as assets under IFRS 15, were
£1.3m (H1 2022: £1.0m) and amortisation of contract costs was £0.7m (H1
2022: £0.6m).
Earnings per share
Net finance expenses reduced to £0.03m (H1 2022: £0.04m) reflecting the
improved cash generation of the business which meant there was no utilisation
of the Group's revolving credit facility, other than in relation to the
partial funding of the acquisition of Untie Nots completed post period end.
The tax credit of £0.2m (H1 2022: credit of £0.02m) reflects the recognition
of a deferred tax asset in the UK reflecting the expected utilisation of a
proportion of the historic losses brought forward and UK research and
development tax credits received. The Group reported a profit after taxation
of £1.0m (H1 2022: loss of £0.6m) and reported basic earnings per share
improved to 3.84p (H1 2022: 2.29p) primarily reflecting the improvement in
profit.
Statement of financial position
The Group had net assets of £17.0m at the end of the Period (June 2022:
£8.6m), with the increase primarily driven by the Placing to raise funds of
£6.7m for the acquisition of Untie Nots which were only paid on completion of
the acquisition post period end.
Cash and net debt
The Group ended the Period with net cash (excluding funds raised for the
acquisition of Untie Nots) of £5.7m (H1 2022: £1.8m) being better than the
Board's expectations. This followed an improved underlying cash performance,
driven by the increase in adjusted EBITDA, generating a positive cash inflow
of £2.1m (H1 2022: £1.0m).
In our announcement released on 13 March 2023, in relation to the evolving
situation at Silicon Valley Bank, we confirmed that as at 10 March 2023 the
Group had total gross cash of c. £7.8m, including approximately £1.6m of
cash within the recently acquired Untie Nots business.
In combination with the £2.0m draw down on the Group's £5.0m revolving
credit facility with Silicon Valley Bank UK ("SVBUK") and £0.4m of debt
within the Untie Nots business, this equates to Group net cash as at 10 March
2023 of £5.4m. The Company currently has no requirements to draw down
further on its SVBUK facility and awaits further information as to the status
of its facility.
The Group has no cash deposits with SVBUK and all cash deposits with Silicon
Valley Bank US became available through the course of 13 March 2023.
In the light of the economic environment, we have taken the step of hedging
elements of our foreign currency net receipts to ensure that the Group is
protected from significant and sudden adverse movements in foreign currency
exchange rates.
Outlook
The Group's strong financial performance in the period, our growing new
business pipeline and international presence, along with the additional growth
opportunity available to us following the acquisition of Untie Nots, provides
us with excitement about our future.
The proven ability of the Eagle Eye AIR platform to deliver personalised
promotions in real-time and at scale means we are in a strong position to
address the growing desire from retailers to offer digital loyalty solutions
to help their customers during these difficult economic times.
While conscious of the challenging wider economic backdrop, trading since the
Period end has continued to be strong. The Board is confident in delivering
another year of profitable growth, with revenue and Adjusted EBITDA for the
year ended 30 June 2023 now expected to be comfortably ahead of current market
expectations.
Consolidated unaudited interim statement of total comprehensive income for the
six months ended 31 December 2022
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2022 2021 2022
Note £000 £000 £000
Continuing operations
Revenue 3 20,015 15,112 31,667
Cost of sales (1,172) (1,122) (2,037)
Gross profit 18,843 13,990 29,630
Operating expenses (17,963) (13,377) (28,896)
5 4,703 3,138 6,476
Adjusted EBITDA ((1) )
Acquisition costs (1,068) - -
Share-based payment charge (888) (581) (1,851)
Depreciation and amortisation (1,867) (1,944) (3,891)
Operating profit 880 613 734
Finance income - - 1
Finance expense (25) (35) (50)
Profit before taxation 855 578 685
Taxation 165 19 (131)
Profit after taxation for the financial period 1,020 597 554
Foreign exchange adjustments (237) 29 582
783 626 1,136
Total comprehensive profit attributable to the owners of the parent for the
financial period
((1)) Adjusted EBITDA excludes share-based payment charge, depreciation,
amortisation and the costs of the acquisition of Untie Nots from the measure
of profit
Earnings per share
From continuing operations
Basic 4 3.84p 2.29p 2.12p
Diluted 4 3.38p 2.01p 1.86p
Consolidated unaudited interim statement of financial position as at 31
December 2022
Unaudited Unaudited Audited
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Non-current assets
Intangible assets 6,753 6,696 6,663
Contract fulfilment costs 2,126 344 1,433
Property, plant and equipment 774 924 684
Deferred taxation 127 513 131
9,780 8,477 8,911
Current assets
Trade and other receivables 12,902 7,400 9,853
Current tax receivable 444 - 718
Cash and cash equivalents 14,409 2,202 3,632
27,755 9,602 14,203
Total assets 37,535 18,079 23,114
Current liabilities
Trade and other payables (16,055) (9,735) (12,185)
Financial liabilities (2,000) (400) -
(10,135) (12,185)
(18,055)
Non-current liabilities
Other payables (2,468) (1,343) (2,362)
Total liabilities (20,523) (11,478) (14,547)
Net assets 17,012 6,601 8,567
Equity attributable to owners of the parent
Share capital 278 261 264
Share premium 24,445 17,503 17,685
Merger reserve 3,278 3,278 3,278
Share option reserve 6,264 4,577 5,549
Retained losses (17,253) (19,018) (18,209)
Total equity 17,012 6,601 8,567
Consolidated unaudited interim statement of changes in equity for the six
months ended 31 December 2022
Share capital Share premium Merger reserve Share option reserve Retained Total
losses
£000 £000 £000 £000 £000 £000
261 17,503 3,278 3,997 (19,644) 5,395
Balance at 1 July 2021
Profit for the period - - - - 597 597
- - - - 29 29
Other comprehensive income
Foreign exchange adjustments
- - - - 626 626
Transactions with owners
Share-based payment charge - - - 580 - 580
Balance at 31 December 2021 261 17,503 3,278 4,577 (19,018) 6,601
- - - - (43) (43)
Loss for the period
- - - - 553 553
Other comprehensive income
Foreign exchange adjustments
- - - - 510 510
Transactions with owners
Exercise of share options 3 182 - - - 185
Fair value of share options exercised - - - (299) 299 -
Share-based payment charge - - - 1,271 - 1,271
3 182 - 972 1,456
299
264 17,685 3,278 5,549 (18,209) 8,567
Balance at 30 June 2022
Profit for the period - - - - 1,020 1,020
- - - - (237) (237)
Other comprehensive income
Foreign exchange adjustments
- - - - 783 783
Transactions with owners
Issue of share capital 13 6,702 - - - 6,715
Exercise of share options 1 58 - - - 59
Fair value of share options exercised in the Period - - - (173) 173 -
Share-based payment charge - - - 888 - 888
6,760 - 173 7,662
14 715
Balance at 31 December 2022 278 24,445 3,278 6,264 (17,253) 17,012
Included in "retained losses" is a cumulative foreign exchange profit of
£276,000 (June 2022: £513,000).
Consolidated unaudited interim statement of cash flow for the six months ended
31 December 2022
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Cash flows from operating activities
Profit before taxation 855 578 685
Adjustments for:
Depreciation 187 149 320
Amortisation 1,680 1,795 3,570
Share-based payment charge 888 581 1,851
Finance income - - (1)
Finance expense 25 35 50
Increase in trade and other receivables (3,049) (1,205) (3,659)
Increase in trade and other payables 4,144 1,664 5,155
Income tax paid (56) (373) (785)
Income tax received 426 221 221
Net cash flows from operating activities 5,100 3,445 7,407
Cash flows from investing activities
Payments to acquire property, plant and equipment (277) (246) (178)
Payments to acquire intangible assets (2,462) (2,113) (4,943)
(2,739) (2,359) (5,121)
Net cash flows used in investing activities
Cash flows from financing activities
Net proceeds from issue of equity 6,774 - 185
Proceeds from borrowings 2,000 200 900
Repayment of borrowings - (700) (1,800)
Capital payments in respect of leases (96) (91) (185)
Interest paid in respect of leases (11) (16) (29)
Interest received - - 1
Interest paid (14) (19) (21)
8,653 (626) (949)
Net cash flows from financing activities
Net increase in cash and cash equivalents in the period 11,014 460 1,337
Foreign exchange adjustments (237) 29 582
Cash and cash equivalents at beginning of period 3,632 1,713 1,713
14,409 2,202 3,632
Cash and cash equivalents at end of period
Notes to the consolidated unaudited interim financial statements
1. Basis of preparation
The Group's half-yearly financial information, which is unaudited,
consolidates the results of Eagle Eye Solutions Group plc and its subsidiary
undertakings up to 31 December 2022. The Group's accounting reference date is
30 June. Eagle Eye Solutions Group plc's shares are listed on the
Alternative Investment Market of the London Stock Exchange (AIM).
The Company is a public limited liability company incorporated and domiciled
in England & Wales. The presentational and functional currency of the
Group is Sterling. Results in this consolidated financial information have
been prepared to the nearest £1,000.
Eagle Eye Solutions Group plc and its subsidiary undertakings have not applied
IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed
groups, in the preparation of this half-yearly financial report.
The accounting policies used in the preparation of the financial information
for the six months ended 31 December 2022 are in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards ('IFRS') as adopted by the European Union and are consistent with
those which will be adopted in the annual financial statements for the year
ending 30 June 2023.
The profit before interest, tax, depreciation, amortisation and share-based
payment charge is presented in the statement of total comprehensive income as
the Directors consider this performance measure provides a more accurate
indication of the underlying performance of the Group and is commonly used by
City analysts and investors.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria of IFRS, as adopted by the European
Union, these interim financial statements do not contain sufficient
information to comply with IFRS.
The comparative financial information for the year ended 30 June 2022 has been
extracted from the annual financial statements of Eagle Eye Solutions Group
plc. These interim results for the period ended 31 December 2022, which are
not audited, do not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006. The financial information does not therefore
include all of the information and disclosures required in the annual
financial statements.
Full audited accounts of the Group in respect of the year ended 30 June 2022,
which received an unqualified audit opinion and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006, have been delivered to
the Registrar of Companies.
2. Going concern basis
As part of their going concern review the Directors have followed the
guidelines published by the Financial Reporting Council entitled "Guidance on
Risk Management and Internal Control and Related Financial and Business
Reporting''. The Directors have prepared detailed financial forecasts and cash
flows looking beyond 12 months from the date of this half-yearly financial
information. In developing these forecasts, the Directors have made
assumptions based upon their view of the current and future economic
conditions that will prevail over the forecast period.
On the basis of the above projections, the Directors are confident that the
Group has sufficient working capital to honour all of its obligations to
creditors as and when they fall due. In reaching this conclusion, the
Directors have considered the forecast cash headroom, the resources available
to the Group and the potential impact of changes in forecast growth and other
assumptions, including the potential to avoid or defer certain costs and to
reduce discretionary spend as mitigating actions in the event of such changes.
Accordingly, the Directors continue to adopt the going concern basis in
preparing this half-yearly financial information.
3. Segmental analysis
The Group is organised into one principal operating division for management
purposes. Revenue is analysed as follows:
Unaudited Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Development and set up fees 4,321 3,623 7,645
Subscription and transaction fees 15,694 11,489 24,022
20,015 15,112 31,667
Unaudited Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
AIR revenue 18,697 13,887 29,497
Messaging revenue 1,318 1,225 2,170
20,015 15,112 31,667
The majority of the Group's revenue comes from services which are transferred
over time.
4. Earnings per share
The calculation of basic earnings per share is based on the result
attributable to ordinary shareholders divided by the weighted average number
of ordinary shares in issue during the period. The calculation of diluted
earnings per share is based on the result attributable to ordinary
shareholders divided by the weighted average number of ordinary shares in
issue during the period, diluted for the effect of options being converted to
ordinary shares. Basic and diluted earnings per share from continuing
operations are calculated as follows:
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
H1 2023 H1 2023 H1 2023 H1 2022 H1 2022 H1 2022
Earnings Profit Weighted average number of ordinary shares Earnings Profit Weighted average number of ordinary shares
per share £000 per share £000
pence pence
Basic profit/(loss) per share 3.84 1,020 26,595,355 2.29 597 26,096,563
Diluted profit/(loss) per share 3.38 1,020 30,146,994 2.01 597 29,750,336
5. Alternative performance
measure
Adjusted EBITDA is a key performance measure for the Group and is derived as
follows:
Unaudited Unaudited Unaudited Year to
6 months to 6 months to 31 December 30 June
31 December 2021 2022
2022
£000 £000 £000
Profit before taxation 855 578 685
Add back:
Costs associated with acquisition of Untie Nots 1,068 - -
Finance income and expense 25 35 49
Share-based payments 888 581 1,851
Depreciation and amortisation 1,867 1,944 3,891
Adjusted EBITDA
4,703 3,138 6,476
EBITDA has been adjusted to exclude share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit, along
with costs of the acquisition of Untie Nots in FY23
6. Adjusted net cash
30 June 2022 Cash flow Foreign exchange adjustments 31 December 2022
£000 £000 £000 £000
Cash and cash equivalents 3,632 11,014 (237) 14,409
Financial liabilities - (2,000) - (2,000)
Net placing proceeds received - (6,715) - (6,715)
2,299 (237)
Adjusted net cash 3,632 5,694
Adjusted net cash is defined as cash and cash equivalents less financial
liabilities and excludes the placing proceeds associated with the acquisition
of Untie Nots which were paid out following completion on 3 January 2023.
7. Availability of this Interim Announcement
Copies of this announcement are available on the Company's website,
www.eagleeye.com (http://www.eagleeye.com) .
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