REG - essensys PLC - Full year results
26/11/2024 07:00
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RNS Number : 5919N essensys PLC 26 November 2024
26 November 2024
essensys plc
("essensys", the "Company" or the "Group")
Full year results
Performance ahead of market expectations, as previously guided
Successful transition to pure-play SaaS model supports scalable, sustainable
growth
On track to be EBITDA profitable in FY25
essensys plc (AIM:ESYS), the leading global provider of software and
technology to the flexible workspace industry, announces its audited results
for the twelve months ended 31 July 2024 ("FY24"). All information relates
to this period, unless otherwise specified.
Financial summary:
£m unless otherwise stated FY24 FY23 Change
Revenue 24.1 25.3 -4%
Recurring revenue(1) 20.2 20.9 -3%
Run Rate Annual Recurring Revenue (ARR)(1) 20.3 20.0 2%
Revenue at constant currency(2) 24.8 25.3 -2%
Recurring revenue at constant currency 20.8 20.9 -1%
Run rate ARR at constant currency 21.1 20.0 5%
Adjusted LBITDA(3) (0.9) (6.3) 86%
Statutory loss before tax (5.5) (15.5) 65%
Loss per share (pence) (5.1)p (24.4)p
Net Cash 3.1 7.9
Strategic progress supports higher quality of earnings and a return to profit
in FY25
· Migration of all customers to pure-play SaaS product, essensys
Platform, completed in FY24
· essensys Platform is a significant evolution of our proposition,
setting a strong foundation for sustainable growth:
· Scalable model expected to deliver greater recurring revenues and
higher gross margin
· Streamlined offering is easier for customers to buy, with faster
time to deployment at lower entry cost
· Operational benefits to commercial real estate operators from
enhanced products and improved functionality, such as essensys Platform's
Intelligence Engine
· Momentum with strategic customers supporting greater revenue
visibility and quality of earnings:
· Land: eleven new strategic customers, resulting in growth of 9%
in number of strategic customers
· Expand: two major expansion contracts with strategic customers,
expected to deliver at least £1.5m ARR by September 2025
· Grow: launch of Intelligence Engine in H1 FY24 and impending
launch of Smart Access solution in H2 FY25 provide further opportunity for
growth
· 7% growth in number of sites globally, with significant
contributions from North America, Europe, and the Asia-Pacific region
· Strategic customer Net Revenue Retention of 111%, reflecting
success in retaining and growing with our existing customer base
· Leaner organisation supports better decision-making,
collaboration and drive towards profitability
Continued improvement in key financial metrics driving improved revenue mix
· Revenue, LBITDA and cash ahead of market expectations, as
previously guided in the Company's full year trading update on 29 August 2024,
reflecting progress with strategy
· £9m delivery of annualised cost savings, following the
reorganisation implemented in FY23
· Annual recurring revenue up 5% at constant currency reflecting
growth from strategic customers
· ARR from strategic customers up 8%, accounting for the majority
of Group ARR (82%)
· ARR now 84% of total revenue
· Lower revenues, as expected, from non-strategic customers and
marketplace
· Group revenue down 2% at constant currency as a result of
reduction in non-strategic customers and lower non-recurring revenue
· Adjusted LBITDA significantly reduced by 86% to loss of £0.9m
(FY23: £6.3m loss), following completion of Group reorganisation
· essensys remains debt-free with net cash of £3.1m at 31 July
2024, including a £0.9m tax credit received in Q424
Current trading and outlook
· On track to deliver positive adjusted EBITDA in FY25 and moving
to run rate cash generation by the end of the financial year
· Sustainable, continued improvement in revenue mix expected as
customers benefit from our pure-play SaaS product (essensys Platform)
· Sales bookings expectations supported by strategic customers'
expansion plans and new customer opportunities
· We remain confident in the long-term structural growth
opportunity in the office and flexible workspace market
Mark Furness, Chief Executive Officer of essensys, said:
"essensys has delivered revenue, profitability and cash ahead of market
expectations, as previously announced. This is a robust outcome in market
conditions which continue to be challenging, with delays to sales cycles and
lower capex budgets constraining the activity of our customers.
"Our progress reflects the continuing implementation of our strategy.
Firstly, we have now migrated all customers to our differentiated and
market-leading product, essensys Platform. This sets a strong foundation for
long-term, sustainable growth. Secondly, our longstanding strategy to land,
expand and grow with strategic customers has once again improved our revenue
mix. Thirdly, we have continued to invest in product development, with the
launch of essensys Platform Intelligence Engine, yielding positive feedback.
"As a result of this strategic progress - combined with the benefits of the
operational efficiencies we delivered in FY23 - we remain on track to deliver
positive EBITDA in FY25. We look forward to sharing further progress in the
year ahead. We remain confident in the long-term structural growth
opportunity in the office and flexible workspace market, with a flight to high
quality, amenity-rich office buildings aligned with the types of assets
essensys is designed to empower."
For further information, please contact:
essensys plc +44 (0)20 3102 5252
Mark Furness, Chief Executive Officer
Greg Price, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Broker) +44 (0)20 7496 3000
Peter Steel / James Fischer
FTI Consulting
Jamie Ricketts / Eve Kirmatzis / Usama Ali +44 (0)20 3727 1000
About essensys plc
essensys is the leading global provider of software and technology for
flexible, digitally-enabled spaces, buildings and portfolios. The essensys
Platform simplifies and automates the delivery and management of next
generation, flexible, multi-tenant real estate.
The real estate industry is transforming - it must be flexible to changing
market demands, accommodate hybrid working styles, provide move-in ready
spaces and deliver frictionless experiences and on-demand services. The office
sector is becoming an increasingly digital-first landscape - driven by
end-user demand and delivering digitally enabled spaces is key to success. The
essensys Platform has been designed and developed to help solve the complex
operational challenges faced by landlords and flexible workspace operators as
they grow and scale their operations. It helps our customers to deliver a
simple, secure and scalable proposition, respond to changing occupier demands,
provide seamless occupier experiences, and realise smart building and ESG
ambitions.
Founded in 2006 and listed on the AIM market of the London Stock Exchange
since 2019, essensys is active in the UK, Europe, North America and APAC.
Chairman's statement
In FY24, essensys made solid progress toward profitability, with strategic
investments in innovation supporting both the Company's growth ambitions and
the evolving demands of the flexible workspace sector.
I would like to extend my sincere thanks to the entire essensys team for their
hard work and commitment; their dedication has been instrumental in advancing
our strategic objectives this year.
We have also taken deliberate steps to enhance the quality of our customer
base by focusing on high-value, strategic customers. This transition, while
resulting in a 2% reduction in revenue at constant currency as we move away
from smaller, lower value customers, has established a strong foundation for
sustainable growth.
This year also marked the completion of our reorganisation aimed at
simplifying our operational structure and aligning our cost base with current
revenues. This has delivered significant cost savings and drives a sharper
focus on our core customers and offerings, and means we are well-positioned to
support the future of flexible workspaces.
We achieved a significant milestone by migrating all customers onto the
essensys Platform, reinforcing our leadership in flexible workspace
technology. We have made strides in product development, including the launch
of our Intelligence Engine. We remain on track to launch our Smart Access
product in H2.
Looking ahead to FY25, we anticipate achieving positive Adjusted EBITDA, which
will be an important step toward run rate net cash generation by the end of
the financial year. With a considerably reduced cash burn, we remain debt-free
and ended the year with a net cash position of £3.1 million.
Our ambitions are based on the long-term growth opportunity, supported by
strong partnerships with strategic customers and an expanding pipeline of new
prospects. We are confident that essensys is well-positioned to lead in
providing technology to the flexible workspace sector, creating enduring value
for our investors and meeting the evolving needs of an increasingly dynamic
market.
Chief Executive Officer's Report
Strong foundations for sustainable growth
While market conditions remain challenging, essensys made important progress
in FY24 and delivered a robust trading performance.
During the year we made positive and significant strides forward in three key
areas: our product offering, with all customers now migrated onto essensys
Platform; product development and innovation; and our long-term growth
strategy to land, expand and grow with strategic customers.
This enabled us to deliver revenue, profitability and cash ahead of market
expectations in FY24, as previously announced, after we revised our financial
forecasts downward at the half year in the context of delays to sales cycles
and lower capex budgets, which have constrained the activity of our customers.
Despite this, we signed two significant contract expansions in the year, with
one of the world's largest privately owned commercial real estate companies
and with an Australian listed REIT. The significant expansion opportunity
that exists within such strategic customers provides a strong foundation for
our future growth ambitions.
In FY24 we continued to place a strong emphasis on cost management and
operational simplification. Building on the £8m in cost efficiencies
identified, we delivered a further £1m of savings, bringing total annualised
cost savings to £9m. These measures align with our focus on strategic
customers and are delivering a sustainable improvement to our earnings,
keeping us on track for a return to profit in FY25.
We remain debt-free and had a net cash position of £3.1m at the year end.
essensys is now a leaner organisation and has an appropriate operational
structure and product offering to support the growth plans of our strategic
customers and deliver our long-term growth strategy.
Product
Our accelerated investment in product development over the past four years is
beginning to deliver results and lays the foundation for long-term,
sustainable growth. Our product development efforts are focussed on solving
the key operational challenges of large multi-site office landlords and
flexible workspace operators whilst reducing time-to-value and adoption costs
of our solutions.
Our investment into essensys Platform to deliver a fully converged Access,
Intelligence and Experience solution for our customers continues to be a key
priority for our business. Our Product & Development team represents 30%
of our total headcount which we believe demonstrates our commitment to
delivering compelling, differentiated solutions for our customers.
essensys Platform
We have now migrated all customers to our differentiated and market-leading
product, essensys Platform. We expect margins to improve materially over
time as essensys Platform revenues increase as an overall proportion of our
recurring revenues and lower margin essensys Cloud revenues decrease.
As previously announced, we have separated essensys Platform from our global
private network (essensys Cloud). This allows us to reduce barriers to entry
and simplify the customer onboarding journey for essensys Platform. Alongside
the innovation set out below, this will allow our customers to access a
pure-play SaaS product, which will provide the answers to the issues that the
commercial real estate industry is facing.
As a result, we expect lower future demand for the hardware supply and
installation services we offer. essensys Platform is now the primary driver of
customer demand with both essensys Cloud and Operate (our billing platform
solution) increasingly being relevant to only a small proportion of strategic
customers. We expect this to result in a fundamental change to our revenue mix
over the coming years as essensys Cloud and Operate revenues reduce as a
percentage of total ARR as essensys Platform revenues increase.
Over time we expect a reduction in these lower margin non-recurring revenues
(for example Wi-Fi and networking equipment and essensys Cloud installations)
and so whilst customer capex budgets remain under pressure, we see the
reduction to these onboarding costs as a positive enabler of future customer
adoption.
essensys Platform: Intelligence Engine
During the year, we launched our insight solution, Intelligence Engine. This
has now been released to all customers and has seen good levels of engagement,
particularly across our strategic customers.
A CBRE Global Workplace and Occupancy Insights report published in December
2023 noted that the operational and financial impacts of underutilised space
remain a top concern for commercial real-estate leaders who had a need for
more detailed, higher quality utilisation data.
The report references utilisation rate as the occupancy metric that matters
most and whilst contracted occupancy has historically been a key performance
measure for landlords and workspace operators, the industry has tended to
primarily rely on low-resolution security badge swipes for this more valuable
utilisation data.
Since the pandemic, office utilisation rates are increasingly seen as a
predictor of performance and future returns. With global average office
utilisation of 35%, well below the pre-pandemic global average of 64%,
landlords and workspace providers are having to adapt their offering to
increase occupier utilisation.
In addition to space utilisation, the quality of the in-building digital
experience (DX) is also crucial for landlords and workspace operators. Their
challenge is providing frictionless access to spaces and services as well as a
seamless digital experience. Therefore, WiFi and internet performance are
now key data points.
Using space utilisation and DX as the foundations for Intelligence Engine we
have developed a solution that provides customers with deep insights that can
help them understand how their spaces are used and experienced. We also
believe that as essensys Platform converges disparate systems and
traditionally unconnected data sources (e.g. Wi-Fi/network, bookings, access
control, IoT sensors), we can provide the high-fidelity and high-resolution
insights that the commercial real estate industry is seeking.
Initial feedback on Intelligence Engine has been very positive and supports
future pipeline growth, including the re-engagement of previous prospects, as
well as driving increased retention and traction with strategic customers.
essensys Platform: Bookings and Smart Access
The dynamic booking of shared spaces such as meeting rooms in multi-tenanted
commercial office real estate continues to be a pain point for our strategic
customers and the recent release of Space Bookings in essensys Platform has
allowed our customers the ability to manage the complex demands of their
enterprise tenants across their portfolio. This emerging new capability in
essensys Platform will become increasingly powerful due to its real-time
integration with Smart Access, allowing dynamic booking and access to shared
spaces in the future using simply a smartphone.
We have continued to make progress with the development of our embedded access
control and IoT hardware solution that we currently refer to as Smart Access.
Smart Access leverages the ubiquity of smartphone wallets to create a seamless
tap-book-open experience for building occupiers. The solution converges access
control, space bookings and an IoT sensor gateway to provide a powerful answer
to the problem of managing real-time access and control of space in today's
dynamic and flex-enabled world. The hub's embedded IoT gateway will also
enable the collection of real-time sensor data, further improving the quality
of insights Intelligence Engine can provide. As previously announced, both
hardware elements (reader and hub) are now fully FCC and CE certified and
production tooling is well underway, targeting customer availability early in
H2 FY25.
Strategic customers: Land, Expand and Grow
Our longstanding strategy to Land, Expand and Grow with strategic customers
continues to underpin the improvement to our customer mix, product adoption
and revenue quality.
We are seeing this strategy bear fruit in our focus on high value, strategic
customers with the potential to deliver at least $1m ARR. These are typically
large enterprise customers, particularly blue-chip landlords, who are
instrumental in shaping the future of the commercial real estate industry.
Typically, strategic customers engage us for multiple sites, generate higher
revenues per account and deliver stronger net margins due to the lower costs
afforded by our operational efficiency to serve.
We continue to see improvements in the quality of our customer base with
strategic customers now accounting for 82% of our revenues, up from 77% in
FY23. As a result, the majority of new sites now come from strategic
customers. Net Revenue Retention of 111% within our strategic customer cohort
is higher than net retention across our whole customer base (103%).
One result of our focus on higher-value strategic customers is continuing
churn in the long tail of our non-strategic clients. These smaller customers,
which now represent 18% of overall revenues, are largely single site operators
that do not offer an expansion opportunity and have high service costs and we
expect their numbers to continue to reduce further in the year ahead.
Land
Despite a challenging macro backdrop in which sales cycles and capital
deployment decisions are taking longer, we signed eleven new strategic
customers in FY24. This saw us expand our footprint, resulting in growth of 9%
in our volume of strategic customers.
Expand
In FY24 we signed two major expansion contracts with existing customers,
developing a strategic plan to align our product roadmap with their long-term
goals.
The first of these portfolio MSAs (Master Service Agreement) is with one of
the world's largest privately-owned commercial real estate companies.
Headquartered in the US and with a large global portfolio, this customer is
contracted to deliver a minimum of US$1m ARR by September 2025 with the total
expansion opportunity being significantly larger.
The second is a with an Australian listed REIT which is rolling out essensys
Platform across its existing portfolio as part of a five-year contract and is
expected to reach a run-rate of US$1m ARR by July 2025.
Grow
We have also seen customer site growth across all our operating regions. The
number of sites utilising our essensys Platform has grown by 7% globally, with
contributions across all regions.
The Group's gross retention rates within our strategic customer cohort have
improved to 93% (from 83% in FY23), while net retention rates have reached
111%, indicating that existing customers are not only staying with us, but are
also expanding their use of our services.
US momentum and Global progress
We have continued our momentum in the US, which remains the largest, highest
growth market for the flexible workspace industry - and our primary growth
engine. The US continues to provide a significant long-term opportunity and
accounted for nearly 60% of Group revenues in the year.
US ARR was up 2% and while US total revenue decreased by 10% from £15.8m to
£14.2m, this was due to pressure on capex budgets impacting on non-recurring
revenue. US recurring revenue at constant currency grew by 2%.
Our U.S. pipeline remains robust, with over 200 sites currently in our
pipeline. Notably, 80% of these are with our strategic customers, underscoring
the strength of our relationships. Our strategic customer base continues to
show promising growth trajectories, with expansion plans and strengthened
partnerships driving forward our growth targets. Key highlights include:
· A premier US landlord is set to expand significantly, with plans
to add over 20 new sites within the next year. This rapid growth underlines
their commitment to our platform and highlights a mutual goal of delivering
seamless operational experiences across an expanding portfolio.
· In the UK, one of our larger strategic customers is also planning
for a large-scale expansion, which will further solidify our relationship.
This expansion aligns with our strategy of supporting top tier landlords and
enables us to provide them with scalable, robust solutions.
Strategic landlords are using essensys Platform to deliver a premier digital
experience to occupiers. Customers are taking a portfolio based approach,
working with a select number of partners across their sites, as opposed to
site by site solutions, to deliver an integrated tech stack.
The essensys Platform provides robust, multi-layered security features that
safeguard both tenant data and operational integrity across all sites.
Additionally, strategic landlords are using the essensys Platform Intelligence
Engine to gather insights that offer actionable data points on space
utilisation and identify trends that will benefit customer satisfaction.
Current trading, market conditions and outlook
Our progress in challenging market conditions reflects a continued focus on
the execution of our strategy and strength of our customer relationships.
We believe our transition to a pure-play SaaS model through essensys Platform,
investment in our market-leading product and longstanding strategy to land,
expand and grow with strategic customers position us well to prosecute the
long-term opportunity.
As a result of this strategic progress - combined with the benefits of the
operational efficiencies we started in FY23 - we remain on track to deliver
positive EBITDA in FY25. We see this in our sales pipeline and ARR, which
are driven by our strategic customers' expansion plans. As these customers
see the operational benefits of our pure-play SaaS product (essensys
Platform), we expect a sustainable, continued improvement in gross margins.
The ongoing structural shift in the global office sector, driven by the
bifurcation of offices between premium, amenity rich buildings, which appeal
in the new world of hybrid wording, with older office stock, translates into
an enduring growth opportunity for essensys and our products as landlords
update their assets to meet tenant needs. However, we expect to continue to
see delays to sales cycles and lower capex budgets constraining our customers'
expansion plans, until the macro-economic outlook improves. We remain
confident in the long-term outlook for the business.
Chief Financial Officer's Report
The financial results included in this announcement cover the Group's
consolidated activities for the twelve months ended 31 July 2024. The
comparatives for the previous twelve months were for the Group's consolidated
activities for the twelve months ended 31 July 2023.
Financial Key Performance Indicators
£'m unless otherwise stated Twelve months to July Twelve months to July Change
2024 2023
Group Total Revenue 24.1 25.3 -4%
North America 14.2 15.8 -10%
UK & Europe 8.5 8.7 -2%
APAC 1.4 0.8 74%
Recurring Revenue 20.2 20.9 -3%
North America 12.3 12.6 -2%
UK & Europe 6.6 7.8 -15%
APAC 1.3 0.5 160%
Recurring Revenue %age of Total 84% 83%
Run Rate Annual Recurring Revenue(1) 20.3 20.0 2%
Recurring Revenue at constant currency 20.8 20.9 -1%
North America 12.8 12.6 2%
UK & Europe 7.2 7.8 -8%
APAC 0.8 0.5 60%
Run rate ARR 21.1 20.0 5%
Non-recurring revenue 3.9 4.4 -11%
Gross Profit 13.7 14.9 -8%
Gross Profit percentage 57% 59%
Recurring Revenue margin %age 62% 63%
Operating Expenses (14.6) (21.2) 31%
5%
Adjusted LBITDA (0.9) (6.3) 86%
Statutory loss before tax (5.5) (15.5) 65%
Cash 3.1 7.9
Revenue
Run Rate ARR grew by 2% to £20.3m (FY23: £20.0m). At constant currency,
stripping out the negative impact of movements in the US Dollar results in ARR
growth of 5%, reflecting growth in strategic customers.
ARR from strategic customers increased in the year by 8% to £16.7m (FY23:
£15.5m) and accounts for 82% of Group ARR. The Group introduced 11 new
strategic customers in the year, which resulted in increased ARR of £0.5m.
While ARR was only impacted in the year by the loss of a single strategic
customer following their withdrawal from the flex office market and a net
£1.1m of ARR was added in new sites (net of lost sites), as reported in our
half year results, we expect our largest customer to downsize in H1 FY25, with
a reduction of up to £3m in ARR. This mainly relates to our lower margin
Cloud product (£2m), while our legacy software product, Connect, accounts for
the balance. This is our last US customer using Connect, which is in the
process of being retired.
Overall, ARR increased by £0.8m as a result of 18 new customers in total. ARR
also benefited from a net increase of 32 sites, partly offset by the expected
continuing decline in variable Marketplace revenues (£0.4m).
Group total revenue decreased by 4% to £24.1m in FY24 (FY23 £25.3m),
primarily due to a reduction in non-strategic customers and lower
non-recurring revenue in a capital-constrained market environment. As noted
above, the US dollar also weakened relative to FY23, resulting in a negative
impact to revenue. Total revenue at constant currency decreased by 2%.
Recurring revenue decreased by 3% compared to FY24 (decreasing by 1% at
constant currency). North America underlying dollar denominated recurring
revenue grew by 2% but the weakening of the US dollar compared with FY23 meant
that reported recurring revenue decreased by 2% in the period. The US has seen
a net increase of 9 sites since the FY23 year end, with the losses seen in H1
offset by gains achieved in H2. UK & Europe recurring revenue declined
by 15% year on year, driven by losses of non-strategic customers and reduced
demand for our Operate solution. We have seen a return to net site growth in
this region with closing site numbers up 8 on FY23 year end. APAC growth
continued with 15 new sites live in the year.
Non-recurring revenue comprises set up and installation costs and is
recognised when a site is live. Non-recurring revenue reduced by 11% compared
to FY23, reflecting challenging market conditions, with a reluctance from
customers to invest in capital expenditure. The Group expects that following
its initiative in FY25 to simplify installation, this will reduce the
requirement for upfront investment, reducing barriers to entry and supporting
the Group's emphasis on recurring revenue growth.
Gross margins
Gross profit decreased by 8% in the year, reflecting the reductions seen in
revenue. Gross margins also declined to 57% (FY23: 59%), driven by the
relative pressure on margins relating to installations, which reduced
non-recurring margins by 4 percentage points. Recurring revenue margins also
declined by 1 percentage point to 62%, due to the continuing decline in
traditionally higher margin UK Marketplace services revenue. The move to a
pure play SaaS platform will see the decommissioning of our private network
(essensys Cloud) data centres over the coming months, which will result in
improving margins.
Operating expenses
Operating expenses represent all administrative expenses, excluding
restructuring costs and non-cash items of depreciation, amortisation,
impairment and share option charges.
Operating expenses decreased by £6.6m (31%) compared to the prior year. This
reduction was driven by the Group reorganisation, which began at the end of H1
FY23 and completed at the start of FY24 and reflects the strong emphasis on
cost management and operational simplification in the business. Including the
savings achieved in the prior year, the Group has delivered total annualised
cost savings of £9m, an extra £1m more than the £8m originally identified.
Adjusted LBITDA
Adjusted LBITDA for the year was £5.4m lower than FY23 due to the impact of
the Group reorganisation and continued focus on profitability and cash, which
more than offset the reduction in gross profit.
The Group continues to invest in product development in the UK. Where such
work is expected to result in future revenue, costs incurred that meet the
definition of software development in accordance with IAS38, Intangible
Assets, are capitalised in the statement of financial position. During the
year, the Group capitalised £2.1m in respect of software development (FY23:
£3.8m). This reduction reflects the impact of the Group reorganisation, but
also reflects the progress made in developing our products, with Intelligence
Engine launched in H1 FY24 and our Smart Access solution expected to launch in
H2 FY25.
Taxation
The Group recognised a £2.2m tax credit in the year in respect of R&D
activities for the financial years from FY21 to FY24. Of this, £1.0m was
received during the year for FY21 and FY22, £0.9m was received after the year
end for FY23 and £0.3m was accrued in respect of FY24. The Group had not
previously recognised R&D tax credits but in light of claimed amounts
being successfully recovered considers there a sufficiently reasonable
expectation to recognise a receivable in respect of R&D credits unpaid as
at the balance sheet date. £1.2m was reported on the balance sheet as a
receivable at the year end. Excluding this, the Group incurred a tax charge in
the year of £0.1m (FY23: £0.2m), which represents taxes paid on foreign
income in the year. There remains over £7.5m in Group carried forward taxable
losses and therefore there is no expectation of tax payments in the short
term.
Cash
Cash at the year end was £3.1m (FY23: £7.9m). Cash at the half year was
£3.5m, with cash outflows in H2 reduced to £0.4m. This was supported by tax
credits in respect of R&D activities received in H2 of £0.9m, with an
underlying cash outflow of £1.3m, compared to £4.4m in H1.
Following the year end, the Group has received a further £0.9m of tax credits
in respect of R&D activities and expects cash burn to continue to reduce
into FY25 as essensys Platform revenues increase and we optimise our Cloud
costs. The Group continues to maintain sufficient cash reserves to fund its
working capital requirements and its return to cash generating operations.
Excluding leases, the Group has no debt and has an undrawn £2m loan facility
committed until 31 July 2025.
In light of the continued impacts of global macroeconomic uncertainty, the
Board has considered a number of different scenarios regarding trading and
financial performance into FY25 and beyond and is confident that, in the event
of a significant long-term downturn, the Group will have sufficient cash
resources for the foreseeable future.
Greg Price
Chief Financial Officer
26 November 2024
essensys plc
Consolidated Statement of Comprehensive Loss
for the year ended 31 July 2024
Notes 2024 2023
£000 £000
Turnover 2 24,131 25,254
Cost of sales (10,393) (10,347)
_________ _________
Gross profit 13,738 14,907
Administrative expenses (19,051) (26,176)
Expected credit loss provision (308) (1,037)
Share based payment expense 448 (597)
Restructuring expenses 3 (207) (2,610)
_________ _________
Operating loss 4 (5,380) (15,513)
Interest receivable and similar income 21 216
Interest payable and similar charges (133) (164)
_________ _________
Loss before taxation (5,492) (15,461)
Taxation 5 2,183 (245)
_________ _________
Loss for the year from continuing operations (3,309) (15,706)
_________ _________
Other comprehensive loss
Items that may be reclassified to profit or loss:
Currency translation differences (59) (246)
_________ _________
Other comprehensive loss for the year (59) (246)
_________ _________
Total comprehensive loss for the year (3,368) (15,952)
_________ _________
Basic and Diluted loss per share 6 (5.1p) (24.4p)
_________ _________
essensys plc
Consolidated Statement of Financial Position
as at 31 July 2024
Notes 2024 2023
£000 £000
ASSETS
Non-current assets
Intangible assets 7 9,426 10,059
Property, plant and equipment 847 1,577
Right of use assets 1,319 1,140
_________ _________
11,592 12,776
Current assets
Inventories 888 2,260
Trade and other receivables 7,143 4,617
Cash at bank and in hand 3,101 7,862
_________ _________
11,132 14,739
_________ _________
TOTAL ASSETS 22,724 27,515
_________ _________
EQUITY AND LIABILITIES
EQUITY
Shareholders' equity
Called up share capital 162 162
Share premium 51,660 51,660
Merger reserve 28 28
Retained earnings (35,086) (31,270)
_________ _________
TOTAL EQUITY 16,764 20,580
LIABILITIES
Non-current liabilities
Lease liabilities 432 307
_________ _________
432 307
Current liabilities
Trade and other payables 3,844 4,762
Contract liabilities 648 420
Lease liabilities 1,008 1,264
Current taxes 28 182
_________ _________
5,528 6,628
_________ _________
TOTAL LIABILITIES 5,960 6,935
_________ _________
TOTAL EQUITY AND LIABILITIES 22,724 27,515
_________ _________
essensys plc
Consolidated Statement of Changes in Equity
for the Year Ended 31 July 2024
Share Share Merger Retained Total
capital premium Reserve earnings equity
£000 £000 £000 £000 £000
1 August 2023 162 51,660 28 (31,270) 20,580
Comprehensive loss for the year
Loss for the year - - - (3,309) (3,309)
Currency translation differences - - - (57) (59)
_______ _______ _______ _______ _______
Total comprehensive loss for the year - - - (3,168) (3,168)
_______ _______ _______ _______ _______
Transactions with shareholders
Share based payment charge - - - (448) (448)
_______ _______ _______ _______ _______
31 July 2024 162 51,660 28 (35,086) 16,764
_______ _______ _______ _______ _______
Consolidated Statement of Changes in Equity
For the Year Ended 31 July 2022
Share Share Merger Retained Total
capital premium Reserve earnings equity
£000 £000 £000 £000 £000
1 August 2022 161 51,660 28 (15,889) 35,960
Comprehensive loss for the year
Loss for the year - - - (15,706) (15,706)
Currency translation differences - - - (272) (272)
_______ _______ _______ _______ _______
Total comprehensive loss for the year - - - (15,978) (15,978)
_______ _______ _______ _______ _______
Transactions with shareholders
Share based payment charge - - - 597 597
Issue of new shares 1 - - - 1
_______ _______ _______ _______ _______
31 July 2023 162 51,660 28 (31,270) 20,580
_______ _______ _______ _______ _______
essensys plc
Consolidated Statement of Cash Flows
for the Year Ended 31 July 2024
Notes 2024 2023
£000 £000
Cash used by operations 9 A (2,010) (9,745)
Corporation tax received / (paid) 860 (63)
Foreign exchange differences 82 (31)
_________ _________
Net used by operating activities (1,068) (9,839)
_________ _________
Cash flows from investing activities
Purchases of intangible assets 7 (2,077) (3,843)
Purchases of property plant and equipment (34) (630)
Proceeds from the disposal of fixed assets - 120
Interest received 21 216
_________ _________
Net cash used in investing activities (2,090) (4,137)
_________ _________
Cash flows from financing activities
Proceeds from the issuance of new shares - 1
Repayment of lease principal (1,408) (1,842)
Interest paid on lease liabilities (133) (164)
_________ _________
Net cash used in financing activities (1,541) (2,005)
_________ _________
Net decrease in cash and cash equivalents (4,699) (15,981)
Cash and cash equivalents at beginning of year 7,862 24,122
Effects of foreign exchange rate changes on cash and cash equivalents (62) (279)
_________ _________
Cash and cash equivalents at end of year 3,101 7,862
_________ _________
Cash and cash equivalents comprise:
Cash at bank and in hand 3,101 7,862
_________ _________
1 Basis of Preparation
The consolidated statement of comprehensive loss, the consolidated statement
of financial position, the consolidated statement of changes in equity, the
consolidated statement of cash flows and the associated notes for the year
ended 31 July 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 August
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 63 to 70 of the 2023 Annual Report and
Accounts.
The statutory accounts for the year ended 31 July 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 25 November 2024.
2 Segmental Reporting
The Group generates revenue largely in the UK and the US. The majority of the
Group's customers provide flexible office facilities together with ancillary
services (e.g. meeting rooms and virtual services) including technology
connectivity.
The Group generates revenue from the following activities:
· Establishing services at customer sites (e.g. providing
and managing installations, equipment and training on software); Recurring
monthly fees for using the Group's software platforms;
· Revenue from usage of on demand services such as internet
and telephone usage and other, on demand, variable services; and
· Other ad-hoc service.
The Group has one single business segment which is the provision of software
and technology platforms that manage the critical infrastructure and business
processes, primarily to the flexible workspace segment of the real estate
industry. The Group has two revenue streams and three geographical segments,
as detailed in the tables below.
2A Revenue analysis by geographic area
The Group operates in two main geographic areas, the United Kingdom and North
America. The whole of the turnover is attributed to the principal
activity. The Group's revenue per geographical segment is as follows:
2024 2023
£000 £000
Analysis of turnover by country of destination:
North America 14,158 15,747
United Kingdom and Europe 8,519 8,673
Asia Pacific region 1,454 834
Total Income 24,131 25,254
2B Revenue analysis by revenue streams
The Group has two main revenue streams, essensys Platform and Operate. The
Group's revenue per revenue stream is as follows:
2024 2023
£000 £000
Essensys Platform 22,671 23,543
Operate 1,460 1,711
Total Income 24,131 25,254
Essensys Platform revenue includes all revenue generated in relation to the
essensys Platform product. It includes revenue recognised at a point in time
as well as recognised over a period of time.
Operate revenue includes all revenue generated in relation to the Group's
Operate product. The revenue is recognised over a period of time.
2C Revenue disaggregated by 'point in time' and 'over time'
The Group revenue disaggregated between revenue recognised 'at a point in
time' and 'over time' is as follows:
2024 2023
£000 £000
Revenue recognised at a point in time 3,874 4,341
Revenue recognised over time 20,257 20,913
Total Income 24,131 25,254
2D Revenue from customers greater than 10% of total revenue
Revenue from customers greater than 10% in each reporting period is as
follows:
2024 2023
£000 £000
Customer 1 5,917 6,865
2E Contract assets and liabilities
Contract asset movements were as follows:
2024 2023
£000 £000
At 1 August 468 887
Transfers in the period from contract assets to trade receivables (176) (544)
Excess of revenue recognised over cash (or rights to cash) being recognised 242 175
during the period
Capital asset contract contributions capitalised (21) 57
Capital asset contract contributions released as contract obligations are - (58)
fulfilled
Capitalised commission cost released as contract obligations fulfilled (356) (210)
Commission costs capitalised on contracts 697 161
At 31 July 854 468
Contract liability movements were as follows:
2024 2023
£000 £000
At 1 August 420 815
Amounts included in contract liabilities that were recognised as revenue (420) (815)
during the period
Cash received and receivables in advance of performance and not recognised as 648 420
revenue during the period
At 31 July 648 420
Contract assets are included within 'trade and other receivables' and contract
liabilities is shown separately on the face of the statement of financial
position. Contract assets arise from the group's revenue contracts, where
work is performed in advance of invoicing customers, and contract liabilities
arise where revenue is received in advance of work performed. Cumulatively,
payments received from customers at each balance sheet date do not necessarily
equal the amount of revenue recognised on the contracts. Capital asset
contract contributions represent costs incurred by the Group in the form of
customer incentives spread over the life of the customer contract.
Commission costs capitalised on contracts represents internal sales commission
costs incurred on signing of customer contracts and, in line with the
requirements of IFRS15, spread over the life of the customer contract.
3 Restructuring costs
Restructuring costs were as follows:
2024 2023
£000 £000
Restructuring costs 207 2,610
During the year, an additional step in the global reorganisation plan from the
previous year was actioned to ensure the most rapid return to profitability of
the Group. The costs recognised in this financial year reflect that
restructuring and residual costs incurred at the beginning of the year over
the costs accrued in the previous financial year.
During the previous financial year, the Group announced a global
reorganisation which positions it for sustainable growth, profitability and a
return to cash generation. This included the simplification of global
operations and moves the Group from a regional to a functional structure. The
restructuring costs in FY23 reflect the total expected cost of the
reorganisation, which was completed after the year end. The cost related to
termination of employment, being redundancy costs and payment in lieu of
notice in certain cases, and any other costs to achieve the reorganisation
including the cost to exit office space and the cost of external legal advice
specific to the reorganisation.
4 Operating loss
2024 2023
£000 £000
This is arrived at after charging/(crediting):
Amortisation of intangible assets 2,710 2,081
Depreciation of tangible fixed assets 765 1,405
Depreciation of right of use assets 1,247 1,349
Impairment of right of use assets - 274
Impairment of goodwill - 275
Accelerated amortisation of other intangible assets - 350
Impairment of tangible fixed assets - 313
Fees payable to the Group's auditor (see below) 150 315
(Profit)/loss on disposal of tangible fixed assets - (5)
Exchange differences (5) 31
Research & Development expense 1,988 3,428
Staff costs 13,517 19,858
Share based payments (448) 597
Analysis of fees paid to the Group's auditor:
Annual financial statements - parent company 50 75
Annual financial statements - subsidiary companies 100 133
Audit Fee 150 208
Assurance services - 41
Other services - 66
Non audit services - 107
Total fee 150 315
5 Taxation on loss on ordinary activities
2024 2023
£000 £000
Current tax
UK corporation tax (300) -
Adjustment in respect of previous periods (1,937) -
Foreign tax on income for the year 54 245
Total current tax (2,183) 245
Deferred tax
Origination and reversal of timing differences - -
Adjustments in respect of prior periods - -
Total deferred tax - -
Taxation on loss on ordinary activities (2,183) 245
The tax assessed for the year is higher than the standard rate of corporation
tax in the UK applied to profit before tax. The differences are explained
below:
2024 2023
£000 £000
Loss on ordinary activities before tax (5,492) (15,473)
Tax using the Group's domestic tax rates (25% (2023:21%)) (1,373) (3,249)
Effects of:
Fixed asset differences 70 53
Expenses not deductible for tax purposes (70) 175
Deductions for R&D expenditure relating to the current year (300) -
Deductions for R&D expenditure relating to prior years (1,937) -
Difference in current tax and deferred tax rates - (473)
Other permanent differences (506) 669
Deferred tax not recognised 1,933 3,070
Total tax (credit) / charge for period (2,183) 245
The Group received two payments in the year (and one post year end) in
relation to claims made for UK research and development tax relief that
resulted in receipts totalling £1,937,000. Recognition of the receivables
was not considered probable until the claims were approved by the UK Tax
Authorities. As a result of the successful claims made, management believe
that a claim for this accounting period will mean a receipt for the sum of
£300,000 is probable in the next accounting period and as such have
recognised a receivable of the same amount.
6 Earnings per share
2024 2023
Basic weighted average number of shares 64,677,667 64,407,222
Fully diluted weighted average number of shares 64,677,667 64,407,222
2024 2023
£000 £000
Loss for the year attributable to owners of the group (3,309) (15,706)
Basic and diluted loss per share (pence) (5.1p) (24.4p)
The loss per share has been calculated using the loss for the year and the
weighted average number of ordinary shares outstanding during the period.
Share options held at the year-ended 31 July 2024 are anti-dilutive and so
have not been included in the diluted earnings per share calculation.
7 Intangible assets
Assets in the course Customer Internal software
Group of construction relationships development Software Goodwill Total
£000 £000 £000 £000 £000 £000
Cost
At 1 August 2023 622 335 16,552 280 1,263 19,052
Additions 410 - 1,667 - - 2,077
Transfers - - - - - -
At 31 July 2024 1,032 335 18,219 280 1,263 21,129
Amortisation
At 1 August 2023 - 335 7,981 280 397 8,993
Charge for year - - 2,710 - - 2,710
Impairment - - - - - -
- -
At 31 July 2024 - 335 10,691 280 397 11,703
Net book value
At 31 July 2024 1,032 - 7,522 - 866 9,426
At 31 July 2023 622 - 8,571 - 866 10,059
The goodwill relates to the acquisition of Hubcreate Limited on 18 February
2016. The goodwill all relates to the Operate cash generating unit (CGU).
The Group estimates the recoverable amount of the Operate CGU using a value in
use model by projecting pre-tax cash flows for the next 5 years. The key
assumptions underpinning the recoverable amount of the CGU are forecast
revenue and forecast EBITDA percentage. The forecast revenues in the model are
based on management's past experience and future expectations of performance.
The post-tax discount rate used in all periods is 14% derived from a WACC
calculation and benchmarked against similar organisations within the sector.
Management do not anticipate this CGU providing long term future cash flows
for the group. As such the latest projection shows an average 8% decline in
revenue year on year, which is consistent with the average decline in revenue
over the last three financial years. The average decline in revenue would
need to be above 11.5% to remove any headroom between value in use and current
carrying value. Using a discount rate of 14% (2023: 14%) resulted in no
additional impairment, and as such no additional impairment charge has been
booked in this period (2023: £275,000).
Capitalised internal software development costs relates to both the essensys
CGUs, the first CGU being essensys Platform and the second CGU being
Operate. The amounts specific to each CGU can be separately determined.
The Group estimates the recoverable amount of the essensys Platform CGU using
a value in use model by projecting pre-tax cash flows for the next 5 years
including a terminal value calculation after the fifth year. The key
assumptions underpinning the recoverable amount of the CGU are forecast
revenue and forecast EBITDA percentage. The forecast revenues in the model are
based on management's past experience and future expectations of performance.
The long-term growth rate used in the value in use calculation was 7.5%. The
long-term growth rate would need to fall below 1% to remove any headroom
between value in use and current carrying value. The post-tax discount rate
used in all periods is 14% derived from a WACC calculation and benchmarked
against similar organisations within the sector. Using a discount rate of
14% resulted in no impairment of the essensys Platform CGU; however, in the
prior year in anticipation of all customers having moved from Connect to
essensys Platform, management increased the rate of amortisation by £350,000
of those assets directly attributed to the Connect product which results in
the carrying value of the Connect product being nil as at 31 July 2024.
The asset in course of construction capitalised this year is the cost to date
for development of the software for the Group's in-development dynamic access
control solution. It is expected that the asset will be complete before the
end of the next financial year.
Assets in the course Customer Internal software
Group of construction relationships development Software Goodwill Total
£000 £000 £000 £000 £000 £000
Cost
At 1 August 2022 215 335 13,116 280 1,263 15,209
Additions 407 - 3,436 - - 3,843
Transfers - - - - - -
At 31 July 2023 622 335 16,552 280 1,263 19,052
Amortisation
At 1 August 2022 - 335 5,550 280 122 6,287
Charge for year - - 2,431 - - 2,431
Impairment - - - - 275 275
At 31 July 2023 - 335 7,981 280 397 8,993
Net book value
At 31 July 2023 622 - 8,571 - 866 10,059
At 31 July 2022 215 - 7,566 - 1,141 8,922
8 Events after the reporting date
The group received a payment of £912,000 in relation to a tax credit for
investment in research and development activities. This receipt has been
considered an adjusting post balance sheet event and so has been included
within other receivables and a credit to the income statement.
9 Notes supporting statement of cash flows
9 A Cash from operations
2024 2023
£000 £000
Cash flows from operating activities
Loss for the financial year before taxation (5,492) (15,461)
Adjustments for non-cash/non-operating items:
Amortisation of intangible assets 2,710 2,081
Depreciation of property, plant and equipment 765 1,405
Depreciation of right of use assets 1,247 1,349
Impairment of goodwill - 275
Impairment of intangible assets - 350
Impairment of property, plant and equipment - 313
Impairment of right of use assets - 274
(Profit)/loss on disposal of fixed assets - (5)
Movement in expected credit loss provision 153 (241)
Inventory obsolescence provision 290 -
Share based payment expense (448) 597
Losses on foreign exchange transactions (5) 31
Finance income (21) (216)
Finance expense 133 164
Other (160) 51
(828) (9,033)
Changes in working capital:
Decrease/(increase) in inventories 1,082 286
Decrease/(increase) in trade and other receivables (1,497) 2,060
(Decrease)/increase in trade and other payables (767) (3,058)
Cash used by operations (2,010) (9,745)
9 B Movement in net debt
Cash and cash equivalents Leases Total
£000 £000 £000
As at 31 July 2022 24,122 (3,128) 20,994
Lease additions - (292) (292)
Effect of modifying lease term - (28) (28)
Cashflow (15,981) 2,006 (13,975)
Interest charge - (164) (164)
Exchange movements (279) 35 (244)
As at 31 July 2023 7,862 (1,571) 6,291
Lease additions - (1,074) (1,074)
Effect of modifying lease term - (293) (293)
Cashflow (4,699) 1,592 (3,107)
Interest charge - (86) (86)
Exchange movements (62) (8) (70)
As at 31 July 2024 3,101 (1,440) 1,661
Cash and cash equivalents Total
Leases
£000 £000 £000
Balances as at 31 July 2024
Current assets 3,101 - 3,101
Current liabilities - (1,008) (1,008)
Non-current liabilities - (432) (432)
3,101 (1,440) 1,661
Cash and cash equivalents Total
Leases
£000 £000 £000
Balances as at 31 July 2023
Current assets 7,862 - 7,862
Current liabilities - (1,264) (1,264)
Non-current liabilities - (307) (307)
7,862 (1,571) 6,291
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