REG - essensys PLC - Half Year Trading Update

essensysAnnouncement

28/02/2023 07:00

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RNS Number : 2160R  essensys PLC  28 February 2023

28 February 2023

 

essensys plc

("essensys" or the "Group")

 

Half Year Trading Update

 

 Revenue growth of 18%, accelerated implementation of plan for profit and
cash generation

 

essensys plc (AIM:ESYS), the leading global provider of flexible workspace
technology, announces an unaudited trading update for the half year ended 31
January 2023 ("H1 FY23").

 

Financial Highlights

 

·     Trading during H1 FY23 was in line with management's expectations

·     Total revenue grew by 18% to £12.9m (H1 FY22: £10.9m), driven
primarily by the Group's North American business, which generated growth of
36% to £8.1m (H1 FY22:  £5.9m)

·     New site deliveries increased by 31% year on year resulting in
non-recurring revenue of £2.3m in H1 FY23, twice that of H1 FY22 (£1.1m),
reflecting higher volume and value of sites, with average non-recurring
revenue per site up 69%

·     New sites are generating 17% higher contracted recurring revenue per
site than closed sites on average, mitigating impact of lower value churn

·     76% of new sites live in H1 FY23 with strategic customers(1)

·     89% of new deals signed in H1 FY23 with strategic customers(1)

·     £1.5m ARR from contracted sites not yet live at 31 January 2023

·     Net cash at the period end was £12.6m (31 July 2022: £24.1m) due to
the timing of working capital movements, expected to normalise post-period
end; the Group remains debt free

·    Accelerated strategy to drive profit and cash generation

 

Accelerated strategy to drive profit and cash generation

 

In line with previous guidance, the Group has commenced a reorganisation of
its global operations to position it for sustainable growth, profitability and
a return to cash generation whilst remaining within its existing cash
reserves. This reorganisation is expected to deliver a total of £7.5m
annualised cost savings and will result in the Group being run-rate Adjusted
EBITDA positive during the first quarter of FY24 and run-rate cash flow
positive by the end of FY24 with the Group expected to maintain a minimum cash
balance of at least £3m going forward.

 

This simplification of global operations and move from regional to functional
leadership will also deliver an improved customer journey with better
alignment.

 

The reorganisation comprises a centralisation of the sales and marketing
function, reorganisation of operational capabilities and streamlining the
executive and regional management structures. The Group's go-to-market
capability has been centralised under the leadership of a newly appointed
Group Chief Revenue Officer, Daniel Brown, who will be responsible for all
sales and marketing activities globally. The Group's APAC operations have been
centralised in a hub location in Sydney, Australia, resulting in the closure
of its Singapore and Hong Kong based offices. All Group customer operations
have been streamlined into global functional teams. Collectively, these
actions have removed the need for regional executive leadership and as a
result the regional CEO positions have been removed.

 

The Board has concluded that the reorganisation and resultant simplification
of operational structures has also removed the need for a Chief Operating
Officer ("COO"). As a consequence and by mutual agreement, Alan Pepper will be
leaving the business. Alan has been a valued and important leader at essensys
as CFO and COO in the past five years, helping to oversee the significant
development of the business including its culture, strategy and global
operations. Alan will step down as an executive director immediately but
remain with the business until the end of May 2023 to provide  an orderly
handover of responsibilities.

 

Management will provide further detail on this reorganisation following the
publication of the Group's half year results.

 

Customers

 

New strategic customers with whom we have taken first sites live during H1
FY23 include: a global commercial real estate leader with over 500 locations
in over 100 countries; a North American operator with 100+ locations; the
largest owner of offices and logistical assets in Dublin; one of Australia's
leading flexible workspace consultants; and a Singapore based innovative
provider of urban space solutions.

 

This solid performance with strategic customers and higher value accounts was
achieved despite continued macroeconomic volatility which has seen continued
churn at the lower end of our customer base. Large customers continued to
close lower value sites as part of their ongoing focus on entering premium
spaces to drive their growth plans; this was particularly prevalent in the
second quarter of the financial year. The Group closed H1 FY23 with 459
Connect / essensys Platform sites, an increase of 1 on the FY22 closing
position.

 

Outlook

 

·    Early trading and outlook for H2 FY23 continues in line with
management's expectations, with increasing value of pipeline including a
number of significant new strategic customer opportunities globally.

·     The Group remains on track to deliver revenue and Adjusted EBITDA(2)
in line with market expectations(3). Cash at the end of FY23 will be lower
than expected as a result of the restructuring and inventory levels, but
underlying net cash outflow will be lower than H1 FY23 as a result of working
capital timing.

·   The Group's focused approach on addressing the needs of and driving
further growth with its strategic customer accounts, in particular in the US
and EMEA regions, alongside a focus on profitable growth through its tried and
tested land and expand go-to-market approach underpins the Board's confidence
in delivering value to shareholders over the long term.

 

Jon Lee, Chairman of essensys, said:

"I would like to thank Alan on behalf of the Board and colleagues across
essensys for his commitment and support during his five years with the
business. Alan has been an integral part of the executive management team, as
CFO and more recently as COO during a transformative period for the business.
He will leave with our best wishes for his future career."

 

Mark Furness, Chief Executive Officer of essensys, said:

"essensys grew revenues strongly in the first half of our financial year and
is accelerating plans to return to profitability and cash generation. Our
performance has been positive despite challenging market conditions - and I
would like to thank our people for their continued hard work and dedication,
including those who have recently left us. Our customer base, focused on
best-in-class global real-estate leaders, is benefiting from long-term,
structural demand for premium flexible workspace.

 

The strength of our platform and market position is helping us win new
customers which match our ambitions for significant growth through our proven
'land and expand' strategy. This is reflected in increases in the amount of
revenue we are making from our sites.  essensys has a clear strategy, a
proven track record of growth and innovation and a clear plan to return to
profitability in FY24 and generate positive annualised cash flow by the end of
FY24."

 

This announcement contains inside information for the purposes of UK Market
Abuse Regulation. The persons responsible for arranging the release of this
announcement on behalf of the Company are Mark Furness, Chief Executive
Officer, and Sarah Harvey, Chief Financial Officer.

 

For further information, please contact:

 

 essensys plc                                                         +44 (0)20 3102  5252
 Mark Furness, Chief Executive Officer
 Sarah Harvey, Chief Financial Officer

 Singer Capital Markets (Nominated Adviser and Broker)                +44 (0)20 7496 3000
 Peter Steel / Harry Gooden / George Tzimas

 FTI Consulting
 Jamie Ricketts / Eve Kirmatzis / Talia Shirion / Victoria Caton      +44 (0)20 3727 1000

 

About essensys plc

 

essensys is the leading global provider of software and technology for
flexible, digitally-enabled buildings, spaces and portfolios. As the
intelligent digital backbone, essensys provides a powerful platform that
simplifies the delivery and management of next generation, flexible commercial
real estate.

 

The real estate industry is transforming - it must be flexible to changing
market demands, to accommodate hybrid working styles, agile, move-in ready
spaces and the delivery of on-demand digital services.  The office sector is
becoming an increasingly digital-first landscape - driven by end-user demand,
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, responding to changing occupier demands, providing
seamless occupier experiences, and realising 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.

 

Notes:

1.     Strategic customers are those customers who have potential for at
least 20 sites and $1m ARR.

2.     Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation, exceptional costs and other non-trading items such as
impairment, exchange differences and share option charges

3.     The Board of essensys consider that current market expectations for
the year ended 31 July 2023 are total revenue of £27.8m and an Adjusted
EBITDA loss of £6.9m.

 

 

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