REG - IDOX PLC - Final Results
26/01/2023 07:00
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RNS Number : 8886N IDOX PLC 26 January 2023
26 January 2023
Idox plc
('Idox' or the 'Group' or the 'Company')
FY22 Results
"A solid performance, with strong recurring revenue and margin expansion"
Idox plc (AIM: IDOX), a leading supplier of specialist information management
software and solutions to the public and asset intensive sectors, is pleased
to report its financial results for the year ended 31 October 2022.
Financial highlights
Reconciliations between adjusted and statutory earnings are contained at the
end of this announcement.
Revenue
· Revenue increased by 6% to £66.2m (2021: £62.2m), driven by
growth in Public Sector Software.
· Recurring revenue(1) increased by 12% to £40.5m (2021: £36.3m),
and now account for 61% of the Group's total revenue (2021: 58%).
Profit
· Adjusted(2) EBITDA increased by 15% to £22.5m (2021: £19.5m).
· Adjusted(2) EBITDA margin improved to 34% (2021: 31%), driven by
operational improvements, acquisitions, and business mix.
· Statutory operating profit increased by 13% to £8.7m (2021:
£7.6m).
· Statutory operating profit margin improved to 13% (2021: 12%).
· Statutory profit before tax £6.6m (2021: £7.3m).
· Adjusted(3) diluted EPS increased by 7% to 2.44p (2021: 2.27p).
· Statutory diluted EPS decreased to 1.24p (2020: 1.34p).
Cash and debt
· Net debt(4) at 31 October 2022 reduced by 18% to £6.7m (2021:
£8.1m).
· Free cashflow(5) generation of £7.2m (2021: £9.7m).
· Acquisition of LandHawk in the year for £1.1m.
Dividend
· Final dividend of 0.5p per share (2021: 0.4p) declared,
reflecting continuing growth opportunities, our strong financial position and
our confidence in the future.
Operational highlights
Idox has delivered a resilient performance in a year of economic uncertainty
and maintained good progress against the Group's strategic goals:
· Record full year order intake up 19% on FY21 to £74m, with good
wins across the Group, providing good visibility into FY23.
· Good growth of revenue and profit in Public Sector Software (PSS)
buoyed by FY21 acquisitions; stable performance in Engineering Information
Management (EIM) despite difficult market conditions.
· Contract wins and extensions which increase average tenure across
both our PSS and EIM businesses.
· Further enhancement of the Group's geographic information system
mapping (GIS) capabilities with the acquisition of LandHawk, following on from
the three FY21 acquisitions of Aligned Assets, thinkWhere and exeGesIS.
· Continued upscaling of the Pune, India, centre of excellence to
increase capacity, efficiency, capability, and knowledge sharing.
· Clear focus on innovation and consolidation of our product
portfolio, including our continuing journey to transition to cloud across the
portfolio.
Current trading and outlook
· The Group has enjoyed an encouraging start to FY23, with trading
in line with the Board's expectations.
· High levels of recurring revenue, contract renewals, orderbook
and pipeline, providing good visibility which leaves us well placed in our aim
to grow the business by double digits in FY23.
· We continue to target further acquisitions to leverage our
platform.
David Meaden, Chief Executive of Idox said:
"We have continued to make strong progress in line with both expectations and
our strategic plan, despite a high inflationary environment and a period of
political uncertainty across the markets in which we operate.
By refocusing Idox as a software business, we have been largely insulated from
the broader issues affecting the economy and by adopting market leadership
positions in a small number of clearly defined areas, we have also been able
to substantially improve the overall quality of our proposition. Over the past
12 months we have significantly increased our recurring revenue and sales
order intake, providing greater visibility of future revenues. Looking
forward, we are well placed to continue our organic growth.
With a strong balance sheet, we will look to add further capabilities and
capacity through our selective and accretive acquisition strategy. We believe
that by leveraging the scale of our sales and marketing, software development
and overall operations we can improve the performance of acquired businesses
and add real value to our clients. The level of activity has been high in the
year, and we anticipate we will reap the benefit of this hard work moving
forward.
We have started the new financial year encouragingly, with trading in line
with our expectations, and we are confident about the outlook for the year as
a whole."
There will be a webcast at 9:30am UK time today for analysts and investors. To
register for the webcast please contact MHP Communications at
idox@mhpgroup.com
For further information please contact:
Idox plc +44 (0) 870 333 7101
Chris Stone, Non-Executive Chairman investorrelations@idoxgroup.com
David Meaden, Chief Executive
Anoop Kang, Chief Financial Officer
Peel Hunt LLP (NOMAD and Broker) +44 (0) 20 7418 8900
Paul Gillam
Michael Burke
James Smith
MHP Communications + 44 (0) 20 3128 8170
Reg Hoare idox@mhpgroup.com (mailto:idox@mhpgroup.com)
Ollie Hoare
Matthew Taylor
About Idox plc
For more information see www.idoxplc.com (http://www.idoxplc.com/) @Idoxgroup
Alternative Performance Measures
The Group uses these APMs, which are not defined or specified under
International Financial Reporting Standards, as this is in line with the
management information requested and presented to the decision makers in our
business; and is consistent with how the business is assessed by our debt and
equity providers.
(1) Recurring revenue is defined as revenues recognised from support and
maintenance fees, managed service fees (including for hosting) and
Software-as-a-Service subscription fees.
(2) Adjusted EBITDA is defined as earnings before amortisation, depreciation,
restructuring, acquisition costs, impairment, financing costs and share option
costs. Share option costs are excluded from Adjusted EBITDA as this is a
standard measure in the industry and how management and our shareholders track
performance.
(3) Adjusted EPS excludes amortisation on acquired intangibles, restructuring,
financing, impairment, share option and acquisition costs.
(4) Net debt is defined as the aggregation of cash, bank borrowings and
long-term bond.
(5) Free cashflow is defined as net cashflow from operating activities after
taxation less capital expenditure and lease payments.
Annual financial report announcement
The extracts below are from the Annual Financial Report 2022. Note references
refer to notes included in this Annual Financial Report Announcement 2022.
Chair's statement
Introduction
I am pleased to report a good set of results to all of our shareholders and
other stakeholders for the financial year ending 31 October 2022. The business
has maintained its trajectory of improving revenue, profit and net debt that
has been established over the past few years. This year we have seen the
benefits of our focused acquisitions contribution to the strong base that the
business has established, and it is pleasing to note the solid growth in our
levels of recurring revenue that are being delivered through our continued
focus on long-term repeatable revenues.
During the year, there was a role change on our Board of Directors, as we
appointed Anoop Kang to the position of Chief Financial Officer in place of
Rob Grubb. We were delighted to welcome Anoop, who brings a good and
complementary set of experiences to both the Board and the management team. We
are fortunate that Rob sought to be part of the ongoing success of the
business and is heading up our acquisition programme, as M&A Director,
which we see as an important part of future value creation for the business.
He has also been able to help Anoop get off to a fast start with understanding
the business and has mitigated the risk associated with such an important
leadership change.
As I reported last year, in 2021 we made a number of significant strategic
changes through our disposal and acquisition programmes. The programme has
continued, with the acquisition of LandHawk Software Services Limited, a land
mapping and GIS data business, which fits very well with our core local
authority and property business. FY22 has seen a significant focus on the
integration of the acquisitions of Aligned Assets Limited, thinkWhere Limited
and exeGesIS Spatial Data Management Ltd. These integrations have gone very
well, with a complete transfer of our new colleagues onto Idox terms and
conditions, and integration with the core operating systems and processes that
have been established over the past four years.
One of the clearest demonstrations of our successful acquisition programme is
seen in the significant growth in customers and revenues for our Idox Cloud
offering, based on the cloud platform that came with the acquisition of
Tascomi in 2019. Their annual recurring revenues are up 16% in FY22, and the
Group was able to secure 15 new Idox Cloud Customers.
We had set ourselves a target of generating over 35% Adjusted EBITDA margin
sustained over the medium term by investing in improving our core back-office
systems and processes. I am pleased to say that we are well on track to
achieving that target with a Group Adjusted EBITDA margin of 34% this year.
This is a good performance from a mature, well managed business.
As we move into the new financial year, we can expect to see continued growth
in our core businesses enhanced by the acquisitions we have already made. We
will also continue to target further acquisitions to allow us to continue to
leverage the platform that we have created through our operational
investments.
Whilst the Covid-19 pandemic is now behind us, the longer lasting effects in
changes to working patterns remains. We strive to make sure that we have the
right blend of home and office work, and essential and non-essential travel.
Employers need to work hard and creatively to enable appropriate new ways of
working that meet all these new requirements without allowing a drop in the
most important thing, excellent customer service. I have been impressed by the
continuing positive attitudes and behaviours of all our colleagues at Idox,
which has enabled this ongoing strong performance. We will continue to work to
ensure that we maintain the right blend of work experience that meets our
colleagues needs whilst also ensuring the continuous development of our skills
and capabilities.
Building a strong and thriving culture enables us to build value for all our
stakeholders. Each day we see our people living our DRIVE values by being
dynamic, owning our commitments, doing the right thing, valuing those around
them and being passionate about quality. It is with these values in mind that
we continue to develop talent within the business creating an environment
where growth and innovation is the ambition we work towards collectively.
Group Strategy
The Group continued its focus on providing digital solutions and services to
the public sector in the United Kingdom, complemented by our Engineering
Information Management (EIM) business servicing customers across the world.
The key to our success is to ensure we deliver better user results and
productivity improvements for customers through focusing on usability,
functionality and application of integrated digital and increasingly
cloud-based technologies and solutions. The identification of acquisition
opportunities and the integration of completed acquisitions is a key part of
management focus and effort.
Board
There has been one change to the Board in FY22, as reported above. As in the
previous year, we carried out a formal Board Effectiveness review during the
year, and there were some good points raised which we will be incorporating in
the coming year.
I am satisfied that there is sufficient diversity in the Board structure to
bring a balance of skills, experience, independence, and knowledge to the
Group, however, I intend to keep this balance under review and continued
assessment.
Corporate governance
We are cognisant of the important responsibilities we have in respect of
corporate governance and shaping our culture to be consistent with our
objectives, strategy, and business model which we set out in our Strategic
Report and our description of Principal Risks and Uncertainties. The Group is
committed to conducting its business fairly, impartially, in an ethical and
proper manner, and in full compliance with all laws and regulations. In
conducting our business, integrity is the foundation of all Company
relationships, including those with customers, suppliers, communities, and
employees.
Corporate simplification
As highlighted above, during the financial year we completed the integration
of three new companies, Aligned Assets, thinkWhere and exeGesIS, by hiving
their trade and assets in to Idox Software Limited. This process is underway
for our latest acquisition, LandHawk. All of these businesses are enhancing
our core public sector software offering.
Dividends
The Board has proposed a final dividend of 0.5p (2021: 0.4p) for FY22,
bringing the total for the year to 0.5p (2021: 0.4p). Subject to approval at
the AGM, the final dividend will be paid on 14 April 2023 to shareholders on
the register as at 31 March 2023. This decision was reached after a full
consideration of the continuing growth opportunities before the business, our
strong financial position and our confidence in the future.
Summary and outlook
The financial results of the last year reflect the increasing quality of the
Idox business. We operate in good markets, with strong market positions and
insights, and we have every confidence that we can continue the excellent
progress we have seen in FY22. The changes that we have made in the last few
years, to the team, our structure, systems, and processes have delivered a
step-change improvement in our financial performance. We can now point to an
improved stability in performance and confidence for the future, based on
strongly improving orderbooks and levels of recurring revenue. I am delighted
to have had the opportunity to work with all my Idox colleagues during a
period of such tremendous improvement and I look forward to continuing that
work in delivering growing value to all our stakeholders.
Idox stakeholders are fortunate that such a talented group of people,
including our recently joined colleagues from our acquisition programme, have
chosen Idox as a place they want to work. Their expertise and diligence have
continued to deliver the support and value that our customers expect, and I am
pleased to extend my thanks to all of them.
Chris Stone
Chairman
Chief Executive's review
Strong progress
We have continued to make strong progress in line with our strategic plan,
despite a backdrop of high inflation and a period of political uncertainty.
By refocussing Idox as a software business, we have been largely insulated
from the broader issues affecting the wider economy. Our market leading
positions in our chosen markets means we have also been able to substantially
improve the overall quality of our business. This clear focus has delivered
improved margins and cash generated by operations, lower debt, and a stronger
balance sheet.
We aim to be a 'rule of 40' business, where the combination of growth rate
plus EBITDA equates to forty per cent. Through the adoption of our 4 Pillars
(Revenue, Margins, Simplification, Communication), we have continued to
improve our business and automate our processes. These continuous marginal
improvements to our customer engagement and operating models have allowed us
to improve EBITDA margins materially in the year from 31% to 34%.
Growth
Looking forward, we are well placed to continue to grow organically. Over the
past 12 months we have significantly increased our recurring revenue and sales
order intake, providing greater visibility of future revenues.
The local authority sector continues to be robust, and client retention across
our core markets remains very high. We continue to be a partner to each of our
local authority customers, helping them achieve better efficiencies, and we
drive forward innovations that improve the quality and frequency of their
engagement with citizens.
Whilst Public Sector markets have pressure on their budgets, there is a clear
need to improve the way services are delivered to an increasing and complex
system of stakeholders. This is especially true in land and property where we
are focusing more of our ongoing investment on products that connect the wider
eco-system of local authorities, planners, private developers, land agents,
construction companies, estate agents, conveyancers and others who need to
access the same consistent data and processes. We believe there are
opportunities to improve the way the broader system operates and communicates
to the benefit of all parties, in particular there also remains a significant
opportunity to broaden our product offering with existing public sector
clients.
This move to embrace digitisation requires greater accuracy of data and in
particular geo spatial data, which is an area where we have improved our
capabilities with the acquisitions of thinkWhere, LandHawk, Aligned Assets and
exeGesIS over the last 24 months.
With the well documented skills shortages, clients are finding it challenging
to retain and develop key skills, particularly in IT and data. As a trusted
partner, Idox can often fill these gaps, with additional software solutions,
hosting options or professional services.
Scaling the business
With our strong balance sheet, we will look to follow the success to date of
adding further capabilities and capacity through a selective and accretive
acquisition strategy. We believe that by leveraging the scale of our sales and
marketing, software development and overall operations we can improve the
performance of acquired businesses and add real value to our clients. The
level of activity has been high in the year, and we anticipate we will reap
the benefit of this hard work moving forward.
We have good headroom in our facilities to fund further M&A opportunities,
with a £35m revolving credit facility and £10m accordion. We continue to
pursue a number of acquisition opportunities but remain focused on ensuring
strategic alignment whilst maintaining a disciplined approach to valuation.
Operations
We continue to optimise our operations across the Group. In our development
team, following an internal recruitment process, we are pleased to have
appointed Rick Hassard to the new role of Director of Engineering, and
continued to grow our presence in Pune, India.
Shortly after the end of the financial year, we implemented a new divisional
structure that will allow us to delegate more authority to those closest to
our markets, products, and customers and to seek out ways to deliver more
value as part of our 'Fly' stage. Scott Goodwin, Chris Evans, and Steve Bruce
now head up the Land and Property, Communities and Assets operations
respectively.
People
Growth requires that we have flexibility in our organisational model and that
we have talent that can rise to the opportunities presented. Over the last two
years we have put approximately 100 people through the Idox Leadership
Programme, Leading Together, and we are pleased that the recent set of senior
appointments in the business have all been graduates of that programme.
While we work on maintaining and growing a positive culture, we continue to
review and track our rewards and benefits to ensure that our colleagues are
fairly compensated.
We continue to focus heavily on employee engagement, and the importance of
culture and values throughout our business. The Groupwide CEO broadcasts
continue to be very well attended and we were delighted with the response from
our teams to our 'Dare to be Different' survey, aimed at making Idox an
inclusive workplace allowing everyone to be their best selves.
Outlook
We have made an encouraging start to FY23, and we continue to trade in line
with the Board's expectations. We will continue to invest selectively to grow
our capabilities and support our customers. The business has a strong
foundation in property and asset-based solutions and this, along with our
focus on digital transformation and Cloud provision, will underpin our future
strategy and growth. We are well placed in our aim to grow organically by
double digits, given our increase in sales order intake and recurring revenue,
providing greater visibility of future revenues.
We continue to have financial resources at our disposal for accretive and
enhancing acquisitions and, having shown that this can be delivered
successfully, we look forward to driving shareholder value moving forward. We
remain confident about the outlook for the year as a whole
David Meaden
Chief Executive Officer
Chief Operating Officer's review
Overview
I am pleased to provide an operational update and to report successful
progress across the year at Idox. We continue to evolve our operational
structures to deliver better services, more effectively, whilst maintaining
our performance levels and high standards.
Across the Group, colleagues have shown great resilience and determination in
the delivery of critical software and national infrastructure solutions into
our growing customer base.
We are successfully operating in a hybrid working model, with colleagues
working from both office locations and home where roles allow. This continued
flexibility provides colleagues with a balanced approach and works well with
our customer requirements which continue, on the whole, to necessitate remote
working, with only limited onsite presence requested.
Across the Group, our Four Pillars continue to drive our operating model at
both a tactical deployment and strategic level. This approach embodies a clear
methodology and culture for all colleagues when making key decisions within
the business.
Revenue
To provide a more targeted focus on the markets that we serve, and to ensure
our solutions help our customers deliver better services, for FY23 we have
implemented a divisional structure that consolidates Business Units delivering
comparable technical solutions or serving similar markets: Land and Property,
Communities and Assets.
The Divisional structure has been designed to create a direct focus for sales,
products, and customer engagement. Aimed at delivering great customer outcomes
and aligning product roadmaps and innovation investment more dynamically to
their respective market requirements, these changes will help drive high
quality, long-term sustainable revenue growth across the Group. Our operating
model continues to leverage the overall scale of the Group across horizontal
functions including, Software Development, Professional Services, Customer
Support and Infrastructure.
We retain strong business controls and governance to ensure that revenue is of
high quality, and we continue to adopt and implement solutions that help
improve our annually recurring revenues and long-term value.
Focussing on long-term sustainable growth has helped deliver a growth rate of
over 12% for Annual Recurring Revenues across the Group.
We continue to invest in our sales stratification strategy, improving
efficiencies, reducing our overall cost of sales and enhancing the customer
experience. This year we welcomed 190 new customers to Idox and saw our order
intake grow to over £74m (+19% YoY) which was significantly ahead of our
revenues in-year, building momentum into future revenues and orderbook.
We continue to lead the way in the provision of digital SaaS platforms for the
Built Environment and Public Protection, Public Sector market through our Idox
Cloud solutions, winning 15 new customers to the platform. New customers
included North Warwickshire Borough Council and Rother District Council. Our
cloud conversion strategy saw continued successes this year with more
customers committing to long-term agreements with Idox, including both
Shropshire County Council and London Borough of Brent moving to the Idox Cloud
solution. We also saw significant successes in the Local Authority customer
base particularly in the provision of private cloud services; successes
included Aberdeenshire Council, North Lanarkshire Council, Sunderland City
Council and Newport City Council.
In Aligned Assets we continued to win new business throughout 2022, providing
an address management service to the largest police force in the country, the
Metropolitan Police. Our solution delivers critical information and property
intelligence directly to investigating officers. This is a solution that is
fundamental to the emergency dispatch of officers for the whole of Greater
London and the Royal estates, so accuracy, speed and resilience are vital
components of the solution.
In Social Care we saw new wins with Oldham Council, Isle of Wight and
Cambridgeshire County Council. In our Sexual Health Solutions, we saw an
important win with Solution4Health and long-term commitments from Virgin Care
Services, Central London Community Health NHS Trust and Berkshire Healthcare
NHS Foundation Trust.
In Elections we saw new clients for both Elections Management Software and
PVMS (Print & Managed Services), these included Oxford City Council,
Somerset Council, and Scottish Borders Council. Our Databases business
continued to attract additional customers, where we secured over 120 new
customers to our GrantFinder and ResearchConnect SaaS solutions.
In our EIM division we welcomed 15 new customers across a number of different
industries, this included a five-year contract for Lummus Technology LLC,
TransAlta Energy Corporation and Adani-Ambuja Cements Ltd. We also saw
continued commitment and large projects from existing customers including
Canadian Natural Resource Limited (CNRL), Oxy Inc, and PSEG.
Margins
We have seen an overall improvement in Adjusted EBITDA to 34% (2021: 31%) in
our continuing business performance over the last 12-months. We recorded a
statutory profit before tax of £6.6m (2021: £7.3m) representing a statutory
profit margin of 10% (2021: 12%).
Across the Group we continue to invest in our people, technology and
operational initiatives to help drive improvements in margin performance.
Leading Together and other development programmes have created many
opportunities for colleagues from within the business to take on new roles and
promotions.
We have doubled the size of our India operation in Pune and extended our
capabilities to include all aspects of our back-office functions, including
Finance and HR. We have also expanded our development capacity and included
technical consultancy and services resources; this continues to be a key
strategic development area for Idox.
Our operational structure combines the focus of a targeted divisional
go-to-market team focussed on product innovation, revenue and customer growth
with the scale of the entire Group for Engineering, Professional Services,
Customer Support and other back-office functions, this combination maximises
our cost base and resources.
Simplification
We continue with our efforts to operate the Group as a simple and efficient
business, leveraging the scale of the organisation with continued Group wide
operational functions for Professional Services, Engineering, Customer
Helpdesk/Support functions as well as IT, People services and Finance.
A divisional structure provides the leadership required to directly drive
revenue growth and strategic product alignment through bringing the
appropriate market knowledge and domain expertise.
We continue to invest in technology, process improvement and organisational
design across the Group which includes the implementation of Financial Force
as a Professional Services Automation (PSA) tool bringing greater project and
financial controls, better deployment of resources, improved utilisation, and
has allowed Idox to improve the overall Customer Experience.
As we look to maximise our investment in our CRM tools implemented over the
previous years, we have included additional capabilities for forecasting and
deployed pricing automation tools to the portfolio, improving consistency,
efficiency and revenue visibility.
We have also implemented technology to assist Product Management and
Engineering areas; helping to align strategic product objectives with our
corporate objectives. These tools help us drive best practice and execute
delivery across the organisation in a consistent and effective way. A key
initiative of the investment is the provision of a dynamic communication
gateway for customers; improving feedback, delivering release notes, providing
articles for consultation and generating active product roadmaps are all
features of the gateway. This improves the overall collaboration with our
customers and is helping us drive our investments and development efforts into
the areas that really matter for our customers.
We have maintained our commitment to high quality processes by renewing our
ISO 9001 (Quality Management), ISO 14001 (Environmental Management), ISO 45001
(Occupational Health & Safety) and ISO 27001 (Information Security
Management) accreditations as well as achieving certification for ISO 22301
(Business Continuity). I am also pleased to report that during the year, Idox
was fully accredited with Cyber Essential Plus, demonstrating our ongoing
commitment to cyber security and protection protocols).
Communication
This year we have continued to improve the way we work and communicate with
our customers, leveraging technologies previously mentioned to help create
more meaningful engagement and increasing touch points. Additionally, we have
communicated directly through our extensive account management teams, these
are further supported through our internal sales support and our project
management office.
We also work with specific areas of government and industry groups directly
linked to the markets that we serve. This provides access and knowledge of the
latest strategies, requirements and trends enabling Idox to participate in
these discussions and take advantage of these opinions and points of view
within development plans.
We operate a wide and varied communication strategy across all our teams and
look to address issues and challenges identified with openness and
transparency. We aim to reflect our own people's desire for Idox to be a
socially responsible and sustainable business, providing colleagues with time
and resources to support charities and local good causes. Our employee
initiatives, such as Workplace Wellbeing, provide support to our colleagues
and create communities where support and connection is created. We also look
to encourage colleagues to initiate and drive engagement across the business
through shared interest, these have included photography groups, pets,
cycling, knitting and other hobbies and pastimes. We believe that these are
all good signs of a healthy and vibrant business with actively engages
colleagues where all opinions are aired and heard.
FY23 has started well and with our new divisional structure, focussing our
efforts on specific market challenges and aligning our investments into key
revenue opportunities, we are already seeing a positive impact.
Jonathan Legdon
Chief Operating Officer
Financial review
FY22 has seen a robust set of results against challenging market conditions.
The Group delivered increased revenues and improved levels of EBITDA and
margin along with improvements in its net debt position at 31 October 2022. In
addition, the Group continued to progress its M&A strategy and completed
the acquisition of LandHawk in October 2022.
The Idox Content businesses are classified as discontinued operations
following their disposal in FY21. As a result of the disposal there have been
no revenues or EBITDA attributable to this division in the year, however,
there have been finalisation costs associated with the disposal of £0.6m.
The following table sets out the revenues and Adjusted EBITDA for each of the
Group's segments from its continuing and discontinued activities:
FY22 FY21 Variance
£000 £000 £000 %
Revenue
- Public Sector Software 58,283 54,114 4,169 8%
- Engineering Information Management 7,901 8,071 (170) (2%)
- Idox Software 66,184 62,185 3,999 6%
- Idox Content (discontinued) - 3,897 (3,897) (100%)
- Total 66,184 66,082 102 (0%)
Revenue split
- Public Sector Software 88% 82%
- Engineering Information Management 12% 12%
- Idox Software 100% 94%
- Idox Content (discontinued) - 6%
Adjusted EBITDA*
- Public Sector Software 20,974 17,969 3,005 17%
- Engineering Information Management 1,535 1,550 (15) (1%)
- Idox Software 22,509 19,519 2,990 15%
- Idox Content (discontinued) - 276 (276) (100%)
- Total 22,509 19,795 2,714 14%
Adjusted EBITDA margin split
- Public Sector Software 36% 33%
- Engineering Information Management 19% 19%
- Idox Software 34% 31%
- Idox Content (discontinued) - 7%
- Total 34% 30%
* Adjusted EBITDA is defined as earnings before amortisation, depreciation,
restructuring, acquisition costs, impairment, financing costs and share option
costs.
Continuing operations - PSS and EIM
FY22 FY21 Variance
£000 £000 £000 %
Continuing revenues
- Recurring (PSS) 34,557 30,111 4,446 15%
- Recurring (EIM) 5,989 6,139 (150) (2%)
- Total recurring 40,546 36,250 4,296 12%
- Non-recurring (PSS) 23,726 24,003 (277) (1%)
- Non-recurring (EIM) 1,912 1,932 (20) (1%)
- Total non-recurring 25,638 25,935 (297) (1%)
- Total continuing revenue 66,184 62,185 3,999 6%
- Recurring* 61% 58%
- Non-recurring** 39% 42%
* Recurring revenue is defined as revenues associated with access to a
specific ongoing service, with invoicing that typically recurs on an annual
basis and underpinned by either a multi-year or rolling contract. These
services include Support & Maintenance, SaaS fees, Hosting services, and
some Managed Service arrangements which involve a fixed fee irrespective of
consumption.
** Non-Recurring revenue is defined as revenues without any formal commitment
from the customer to recur on an annual basis.
Revenue from continuing operations for the Group increased 6% in the year to
£66.2m (2021: £62.2m). PSS was up 8% for the year at £58.3m (2021: £54.1m)
and EIM has remained broadly flat with revenue of £7.9m (2021: £8.1m).
Taking account of revenues from discontinued businesses in 2021 of £3.9m
total Group revenue is slightly up in the year.
Recurring revenues for the year increased 12% from £36.3m to £40.5m and
represented 61% (2021: 58%) of the total continuing revenue. Within PSS,
recurring revenue increased 15% to £34.6m (2021: £30.1m). Good growth in
recurring revenue in the Group's Local Authority and Grants businesses was
supported by new wins and a full year impact from Aligned Assets, exeGesIS,
and thinkWhere. The recurring revenues in EIM remained stable at £6.0m (2021:
£6.1m).
Non-recurring revenues for the year were marginally lower at £25.6m (2021:
£25.9m). PSS recorded a small reduction of £0.3m resulting in revenue of
£23.7m (2021: £24.0m) with strong contributions from the Local Authority and
Elections businesses. EIM remained stable at £1.9m (2021: £1.9m).
Adjusted EBITDA increased by 15% to £22.5m (2021: £19.5m), delivering an
improved Adjusted EBITDA margin of 34% (2021: 31%). The margin improvement has
been driven by a combination of operational efficiencies, changes in mix and
pricing.
We continue with our efforts to improve efficiencies through marginal gains
across our sales, development, professional services and support activities,
and leverage our common resources to drive higher margins through improved
economies of scale.
Discontinued operations - Content
The Group divested of its Content division during March and April 2021 and
therefore has not recorded any revenues in the year. The table below is
included to provide the comparative figures for FY21.
FY22 FY21 Variance
£000 £000 £000 %
Idox Content revenues
- Recurring - 604 (604) (100%)
- Non-recurring - 3,293 (3,293) (100%)
- 3,897 (3,897) (100%)
- Recurring - 15%
- Non-recurring - 85%
Profit before taxation
The statutory profit before tax was £6.6m (2021: £7.3m). The reasons for the
improved adjusted EBITDA are set out above, and the reasons for the movements
in all other constituent parts of profit before tax are set out below. The
following table provides a reconciliation between adjusted EBITDA and
statutory profit before taxation for continuing operations.
FY22 FY21 Variance
£000 £000 £000 %
Adjusted EBITDA 22,509 19,519 2,990 15%
Depreciation (1,597) (1,581) (16) 1%
Amortisation - software licences and R&D (5,317) (5,062) (255) 5%
Amortisation - acquired intangibles (3,670) (3,561) (109) 3%
Restructuring costs (470) 90 (560) (622%)
Acquisition costs (183) 134 (317) (237%)
Financing costs (30) (110) 80 (73%)
Share option costs (2,584) (1,789) (795) 44%
Net finance costs (2,056) (372) (1,684) 453%
Profit before taxation 6,602 7,268 (666) (9%)
Restructuring costs were £0.5m (2021: £0.1m gain). The restructuring costs
in the year are associated with further simplifications of the Group structure
as we look to remove historical dormant companies associated with previous
acquisitions.
Acquisition costs of £0.2m (2021: £0.1m gain) relates to the acquisition of
LandHawk in the year and finalisation fees associated with the acquisition of
Aligned Assets, thinkWhere and exeGesIS in the prior year. The prior year is
in relation to the acquisition of Aligned Assets, thinkWhere and exeGesIS.
Financing costs of £30k (2021: £0.1m) relate to the annual fee incurred as
part of the loan facility agreement. The prior year costs were incurred as
part of the loan extension and transition to SONIA from LIBOR in October 2021.
Share option costs of £2.6m (2021: £1.8m) relate to the accounting charge
for awards made under the Group's Long-term Incentive Plan. The increase in
the year is driven by the full year impact of awards made in the prior year
coupled with additional awards made in FY22.
Net finance costs have increased to £2.1m (2021: £0.4m) due the impact of a
£1.0m adverse foreign exchange movement (non-cash) on the Euro denominated
bond and a £0.7m adverse impact of an effective interest rate accounting
adjustment on drawn loan balances (also non-cash).
The Group continues to invest in developing innovative technology solutions
across the Idox Software portfolio and has capitalised development costs of
£6.6m (2021: £4.6m). The increase in the year is primarily due to the full
year impact of the FY21 acquisitions (£1.5m), with the remaining £0.5m being
driven by an increase in our development and other outsourced costs.
Taxation
The effective tax rate (ETR) for the year was 16.4% (2021: 9.4%) for total
operations. The ETR for the year for continuing operations was 16.4% (2021:
17.0%).
The main factors for the reduction in the volatility in the ETR on the profit
before tax position were the disposals in FY21 which resulted in income not
subject to tax, meaning permanent and other differences giving rise to ETR
effects were proportionately lower in the current period. These differences
included routine non-allowable amounts, losses utilised in the period in
addition to international losses not recognised in the period and higher
overseas tax rates.
The difference between the statutory rate of 19% and the ETR of 16.42% is due
to tax losses utilised in the year, the impact of overseas tax rates and
international losses arising in the period and not recognised.
There are substantial carried-forward losses not recognised for deferred tax
purposes to date, owing to adoption of a prudent loss recognition position.
The gross value of these losses not recognised to date totals £13m, split
across Malta (£10.9m) and France (£2.1m). The Board is hopeful that the
Group will benefit from these unrecognised tax losses, with the exception of
Malta, in the future and these will be recognised at the point where
utilisation becomes more certain.
Earnings per share and dividends
Basic earnings per share for continuing and discontinued operations decreased
to 1.14p (2021: 2.71p) as a result of the profit for FY21 benefitting from the
£6.29m gain on disposal of the Content businesses. Diluted earnings per share
decreased to 1.11p (2021: 2.65p).
Adjusted basic earnings per share for continuing operations increased 6% to
2.48p (2021: 2.33p) and adjusted diluted earnings per share increased 7% to
2.44p (2021: 2.27p). The difference between the increase in adjusted EBITDA of
15% and the adjusted basic earnings per share of 8% is driven by the increase
in finance costs in the year.
The Board proposes a final dividend of 0.5p per share (2021: 0.4p), which
represents a total dividend for the year of 0.5p per share (2021: 0.4p), at a
total cost of £2.3m (2021: £1.8m).
Balance sheet and cash flows
The Group's net assets have increased to £67.4m compared to £60.8m as at 31
October 2021. The constituent movements are detailed in the Group's
consolidated Statement of Changes in Equity: which are summarised as follows:
12 months to
31 October 2022 £000
Total Equity as per FY21 Financial Report 60,810
Share option movements 2,542
Fair value of deferred consideration shares on purchase of subsidiary 376
Equity dividends paid (1,784)
Profit for the year 5,044
Exchange gains on translation of foreign operations 428
Total Equity as per FY22 Financial Report 67,416
The increase in the Group's net assets is principally due to the profit for
the year, with an improvement in net debt in the year as the Group continued
to target cash generative revenues and margins across its business. This is
bolstered by the increase of intangible assets due to the purchase of LandHawk
in the year, which was offset by the reduction in the right-of-use-assets. The
Group settled VAT deferrals from the previous year of £1.0m and the historic
provision associated with our exited London office.
Cash generated from operating activities before tax as a percentage of
Adjusted EBITDA was 81% (2021: 84%). This decrease was due primarily to the
VAT liability deferrals the Group took advantage of as part of its early
Covid-19 pandemic defensive actions in FY20 which were fully settled in FY22.
The Group generally continues to have high levels of adjusted EBITDA to cash
conversion.
Free cashflow for the year was £7.2m (2021: £9.7m). Free cashflow has
decreased in the year due to the VAT effect referred to above coupled with an
increased investment in capex in the year.
FY22 FY21
£000 £000
Net cashflow from operating activities after taxation 15,647 16,554
Capex (7,558) (5,747)
Lease payments (927) (1,154)
Free cashflow 7,162 9,653
The Group ended the year with net debt of £6.7m (2021: £8.1m), an 18%
improvement on the 2021 net debt position. Net debt comprised cash of £13.9m
less bank borrowings of £9.2m and the Maltese listed bond of £11.3m, which
is due in June 2025. We ended the year with a net debt to Adjusted EBITDA
ratio of 0.3 (2021: 0.42).
The Group retains significant liquidity with cash and available committed bank
facilities and has strong headroom against financial covenants. The Group's
total available facilities at 31 October 2022 consisted of a revolving credit
facility of £35m and £10m accordion which continue to June 2024.
Anoop Kang
Chief Financial Officer
Note 2022 2021
£000 £000
Continuing operations
Revenue 3 66,184 62,185
Cost of sales (15,050) (17,130)
Gross profit 51,134 45,055
Administrative expenses (42,476) (37,415)
Operating profit 8,658 7,640
Analysed as:
Earnings before depreciation, amortisation, restructuring, acquisition costs, 3 22,509 19,519
impairment, financing costs and share option costs
Depreciation (1,597) (1,581)
Amortisation (8,987) (8,623)
Restructuring costs (470) 90
Acquisition costs (183) 134
Financing costs (30) (110)
Share option costs (2,584) (1,789)
Finance income 97 818
Finance costs (2,153) (1,190)
Profit before taxation 6,602 7,268
Income tax charge (991) (1,237)
Profit for the year from continuing operations 5,611 6,031
Discontinued operations
(Loss) / profit for the year from discontinued operations 4 (567) 5,918
Profit for the year attributable to the owners of the parent 5,044 11,949
Other comprehensive income / (loss) for the year 428 (108)
Items that may be reclassified subsequently to profit or loss:
Exchange movements on translation of foreign operations net of tax
Other comprehensive income / (loss) for the year, net of tax 428 (108)
Total comprehensive income for the year 5,472 11,841
Total comprehensive income for the year attributable to owners of the parent 5,472 11,841
Earnings per share attributable to owners of the parent during the year
From continuing operations
Basic 5 1.27p 1.37p
Diluted 5 1.24p 1.34p
From continuing and discontinued operations
Basic 5 1.14p 2.71p
Diluted 5 1.11p 2.65p
The accompanying accounting policies and notes form an integral part of these
financial statements.
Note 2022 2021
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 1,380 1,307
Intangible assets 6 92,410 92,025
Right-of-use-assets 1,782 2,363
Deferred tax assets 2,679 2,623
Total non-current assets 98,251 98,318
Current assets
Trade and other receivables 17,912 16,968
Cash and cash equivalents 13,864 18,283
Total current assets 31,776 35,251
Total assets 130,027 133,569
LIABILITIES
Current liabilities
Trade and other payables 6,811 8,075
Deferred consideration 2,271 2,070
Current tax payable 165 1,399
Other liabilities 23,451 23,547
Provisions 453 1,433
Lease liabilities 545 727
Total current liabilities 33,696 37,251
Non-current liabilities
Deferred tax liabilities 6,086 5,579
Deferred consideration - 841
Lease liabilities 1,265 1,747
Other liabilities 1,038 949
Bonds in issue 11,325 10,998
Borrowings 9,201 15,394
Total non-current liabilities 28,915 35,508
Total liabilities 62,611 72,759
Net assets 67,416 60,810
EQUITY
Called up share capital 4,525 4,469
Capital redemption reserve 1,112 1,112
Share premium account 41,556 41,556
Treasury reserve (594) (594)
Share option reserve 4,816 3,962
Other reserves 8,745 8,789
ESOP trust (466) (417)
Foreign currency translation reserve 239 (189)
Retained earnings 7,483 2,122
Total equity attributable to the owners of the parent 67,416 60,810
The financial statements were approved by the Board of Directors and
authorised for issue on 25 January 2023 and are signed on its behalf by:
David Meaden
Anoop
Kang
Chief Executive Officer Chief
Financial
Officer
The accompanying accounting policies and notes form an integral part of these
financial statements.
Company name: Idox plc Company
number: 03984070
Consolidated statement of changes in equity
Capital redemption Share Treasury reserve Share Other reserves ESOP Foreign currency translation reserve (Accumulated losses) / retained earnings Total
Called up share capital reserve premium £000 option £000 trust £000 £000 £000
£000 £000 account reserve £000
£000 £000
Balance at 1 November 2020 4,450 1,112 41,356 (621) 2,618 7,528 (373) (161) (8,951) 46,958
Issue of share capital 19 - 200 - - - - - - 219
Share option costs - - - - 1,894 - - - - 1,894
Exercise / lapses of share options - - - 27 (550) - - - 535 12
ESOP trust - - - - - - (44) - - (44)
Fair value of deferred consideration shares on purchase of subsidiary - - - - - 1,261 - - - 1,261
Equity dividends paid - - - - - - - - (1,331) (1,331)
Transactions with owners 19 - 200 27 1,344 1,261 (44) - (796) 2,011
Profit for the year - - - - - - - - 11,949 11,949
Other comprehensive loss
Recycled exchange movements on disposal of subsidiaries - - - - - - - 80 (80) -
Exchange movement on translation of foreign operations - - - - - - - (108) - (108)
Total comprehensive (loss) / income for the year - - - - - - - (28) 11,869 11,841
Balance at 31 October 2021 4,469 1,112 41,556 (594) 3,962 8,789 (417) (189) 2,122 60,810
Issue of share capital 56 - - - - - - - - 56
Share option costs - - - - 2,535 - - - - 2,535
Exercise / lapses of share options - - - - (1,681) - - - 1,681 -
ESOP trust - - - - - - (49) - - (49)
Exercise of deferred consideration shares - - - - - (420) - - 420 -
Fair value of deferred consideration shares on purchase of subsidiary - - - - - 376 - - - 376
Equity dividends paid - - - - - - - - (1,784) (1,784)
Transactions with owners 56 - - - 854 (44) (49) - 317 1,134
Profit for the year - - - - - - - - 5,044 5,044
Other comprehensive income
Exchange movement on translation of foreign operations - - - - - - - 428 - 428
Total comprehensive income for the year - - - - - - - 428 5,044 5,472
Balance at 31 October 2022 4,525 1,112 41,556 (594) 4,816 8,745 (466) 239 7,483 67,416
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated cashflow statement
Note 2022 2021
£000 £000
Cash flows from operating activities
Profit for the year before taxation 6,035 13,186
Adjustments for:
Depreciation of property, plant and equipment 848 801
Depreciation of right-of-use assets 749 1,021
Amortisation of intangible assets 8,987 8,835
Loss / (gain) on disposal / purchase of subsidiary 657 (6,679)
Finance income (73) (800)
Finance costs 2,034 1,060
Debt issue costs amortisation 119 144
Research and development tax credit (449) (267)
Share option costs 2,584 1,908
Profit on disposal of fixed assets (15) -
Movement in receivables (1,316) 3,086
Movement in payables (1,896) (5,947)
Cash generated by operations 18,264 16,348
(Tax paid) / tax refunded (2,617) 206
Net cash from operating activities 15,647 16,554
Cash flows from investing activities
Acquisition of subsidiaries (2,219) (10,530)
Disposal of subsidiaries (146) 10,669
Proceeds on sale of fixed assets 15 -
Purchase of property, plant and equipment (911) (1,110)
Purchase of intangible assets (6,647) (4,637)
Finance income 73 66
Net cash used in investing activities (9,835) (5,542)
Cash flows from financing activities
Interest paid (997) (967)
Loan drawdowns 2,500 15,600
Loan related costs (183) (292)
Loan repayments (9,100) (35,000)
Principal lease payments (927) (1,154)
Equity dividends paid (1,784) (1,331)
Issue of own shares (133) 64
Net cash outflows from financing activities (10,624) (23,080)
Net movement in cash and cash equivalents (4,812) (12,068)
Cash and cash equivalents at the beginning of the year 18,283 30,812
Exchange gains / (losses) on cash and cash equivalents 393 (461)
Cash and cash equivalents at the end of the year 13,864 18,283
The accompanying accounting policies and notes form an integral part of these
financial statements.
Notes to the condensed financial statements
1 BASIS OF PREPARATION
The financial information contained in these condensed financial statements
does not constitute the Group's statutory accounts within the meaning of the
Companies Act 2006.
Statutory accounts for the year ended 31 October 2021 and 31 October 2022 have
been reported on, with an unqualified opinion.
Whilst the financial information included in this Annual Financial Report
Announcement has been computed in accordance with International Financial
Reporting Standards (IFRS) this announcement, due to its condensed nature,
does not itself contain sufficient information to comply with IFRS.
This Annual Financial Report Announcement includes note references that refer
to notes in this Annual Financial Report Announcement 2022.
Statutory accounts for the year ended 31 October 2021 have been delivered to
the Registrar of Companies. The statutory accounts for the year ended 31
October 2022, prepared under IFRS, are available on the Group's website:
https://www.idoxgroup.com/investors/financial-reporting/
(https://www.idoxgroup.com/investors/financial-reporting/) and will be
delivered to the Registrar in due course. The Group's principal accounting
policies as set out in the 2021 statutory accounts have been applied
consistently in all material respects.
Going Concern
The Directors, having made suitable enquiries and analysis of the accounts,
consider that the Group has adequate resources to continue in business for the
foreseeable future. In making this assessment, the Directors have considered
the Group's budget, cash flow forecasts, available banking facility with
appropriate headroom in facilities and financial covenants, and levels of
recurring revenue.
In December 2019 the Group had refinanced with the National Westminster Bank
plc, Silicon Valley Bank and Santander UK plc. The facilities, which comprise
a revolving credit facility of £35,000,000, were extended during FY21 and are
committed until June 2024.
As part of the preparation of our FY22 results, the Group has performed
detailed financial forecasting, as well as severe stress-testing in our
financial modelling, but have not identified any credible scenarios that would
cast doubt on our ability to continue as a going concern.
The Group has performed sensitivity analysis of financial modelling to
identify what circumstances could lead to liquidity challenges. This
forecasting has demonstrated that the Group would only breach its banking
covenants in the most severe of circumstances which are not considered
credible. Under this sensitivity analysis, recurring revenues renewals were
assumed to be 27% lower than plan and non-recurring revenues won and delivered
lower by 55%, with no corresponding action on costs to address these
shortfalls. Under this scenario, the Group would likely be in breach of its
banking covenants during FY24, albeit liquidity even in this extreme scenario
remains strong. This scenario is not considered credible given the growth the
Group has experienced in FY20 to FY22 in recurring and non-recurring revenues
despite the impact of the Covid-19 pandemic.
Therefore, this supports the going concern assessment for the business.
The Annual Financial Report Announcement was approved by the Board of
Directors on 25 January 2023 and signed on its behalf by David Meaden and
Anoop Kang.
2 RESPONSIBILITY STATEMENTS UNDER THE DISCLOSURE AND TRANSPARENCY RULES
The Directors confirm that:
· the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development
and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
· the annual report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the company's position and performance, business model
and strategy.
The name and function of each of the Directors for the year ended 31 October
2022 are set out in the Annual Financial Report 2022.
3 SEGMENTAL ANALYSIS
During the year ended 31 October 2022, the Group was organised into two
operating segments, which are detailed below.
Financial information is reported to the chief operating decision maker, which
comprises the Chief Executive Officer and the Chief Financial Officer, monthly
on a business unit basis with revenue and operating profits split by business
unit. Each business unit is deemed an operating segment as each offers
different products and services.
· Public Sector Software (PSS) - delivering specialist information
management solutions and services to the public sector.
· Engineering Information Management (EIM) - delivering engineering
document management and control solutions to asset intensive industry sectors.
During the year ended 31 October 2021 the Content (CONT) segment was sold. As
Content was a separately identifiable segment, the results for the comparative
year have been classed as a discontinued operation.
Segment revenue comprises sales to external customers and excludes gains
arising on the disposal of assets and finance income. Segment profit reported
to the Board represents the profit earned by each segment before the
allocation of taxation, Group interest payments and Group acquisition costs.
The assets and liabilities of the Group are not reviewed by the chief
operating decision maker on a segment basis. The Group does not place reliance
on any specific customer and has no individual customer that generates 10% or
more of its total Group revenue.
To provide a more targeted focus on the markets that we serve, and to ensure
our solutions help our customers deliver better services, from 1 November
2022, we have implemented a divisional structure that consolidates Business
Units delivering comparable technical solutions or serving similar markets:
Land, Property & Public Protection, Communities and Assets.
The Divisional structure has been designed to create a direct focus for sales,
products, and customer engagement. Aimed at delivering great customer outcomes
and aligning product roadmaps and innovation investment more dynamically to
their respective market requirements, these changes will help drive high
quality, long-term sustainable revenue growth across the Group. Our operating
model continues to leverage the overall scale of the Group across horizontal
functions including, Software Development, Professional Services, Customer
Support and Infrastructure.
Information provided to the chief operating decision maker in FY23 will be
revised in line with the new operating structure and therefore the segmental
disclosures will be aligned accordingly.
The segment revenues by geographic location are as follows:
Continuing Discontinued Total Group
£000 £000 £000
2022: Revenues from external customers
United Kingdom 58,053 - 58,053
USA 4,834 - 4,834
Europe 2,781 - 2,781
Rest of World 516 - 516
66,184 - 66,184
Continuing Discontinued Total Group
£000 £000 £000
2021: Revenues from external customers
United Kingdom 52,038 46 52,084
USA 5,181 27 5,208
Europe 4,275 3,824 8,099
Rest of World 691 - 691
62,185 3,897 66,082
Revenues are attributed to individual countries on the basis of the location
of the customer.
The segment revenues by type are as follows:
Continuing Discontinued Total Group
£000 £000 £000
2022: Revenues by type
Recurring revenues - PSS 34,557 - 34,557
Recurring revenues - EIM 5,989 - 5,989
Recurring revenues 40,546 - 40,546
Non-recurring revenues - PSS 23,726 - 23,726
Non-recurring revenues - EIM 1,912 - 1,912
Non-recurring revenues 25,638 - 25,638
66,184 - 66,184
Revenue from sale of goods 41,023 - 41,023
Revenue from rendering of services 25,161 - 25,161
66,184 - 66,184
The methodology for calculating the split between revenue from sale of goods
and rendering of services has changed in the current year with the revenues
from support and maintenance being allocated to sale of goods rather than
rendering of services as was the case in FY21. This more aligns with the
nature of the revenue as it relates to the ongoing access of software updates
and is consistent with how it is categorised in the wider market.
Continuing Discontinued Total Group
£000 £000 £000
2021: Revenues by type
Recurring revenues - PSS 30,111 - 30,111
Recurring revenues - EIM 6,139 - 6,139
Recurring revenues - Content - 604 604
Recurring revenues 36,250 604 36,854
Non-recurring revenues - PSS 24,003 - 24,003
Non-recurring revenues - EIM 1,932 - 1,932
Non-recurring revenues - Content - 3,293 3,293
Non-recurring revenues 25,935 3,293 29,228
62,185 3,897 66,082
Revenue from sale of goods 23,940 1,220 25,160
Revenue from rendering of services 38,245 2,677 40,922
62,185 3,897 66,082
Recurring revenue is income generated from customers on an annual contractual
basis. Recurring revenue amounts to approximately 61% (2021: 58%) of
continuing revenue, which is revenue generated annually from sales to existing
customers.
All revenues are recognised over the period of the contract, unless the only
performance obligation is to licence or re-licence a customer's existing user
without any further obligations, in which case the revenue is recognised upon
completion of the obligation.
All contracts are issued with commercial payment terms without any unusual
financial or deferred arrangements and do not include any amounts of variable
consideration that are constrained.
The Group's total outstanding contracted performance obligations at 31 October
2022 was £70,347,000 and it is anticipated that 52% of this will be
recognised as revenue in FY23 and 27% in FY24.
The segment results by business unit for the year ended 31 October 2022:
Continuing Operations Discontinued Operations
Total CONTENT
PSS EIM £000 £000 Total
£000 £000 £000
Revenue 58,283 7,901 66,184 - 66,184
Earnings before depreciation, amortisation, restructuring, acquisition costs, 20,974 1,535 22,509 - 22,509
impairment, financing costs and share option costs
Depreciation (688) (160) (848) - (848)
Depreciation - right-of-use-assets (663) (86) (749) - (749)
Amortisation - software licences and R&D (4,431) (886) (5,317) - (5,317)
Amortisation - acquired intangibles (3,604) (66) (3,670) - (3,670)
Restructuring costs (72) (398) (470) - (470)
Acquisition costs (183) - (183) - (183)
Share option costs (2,246) (338) (2,584) - (2,584)
Segment operating profit / (loss) 9,087 (399) 8,688 - 8,688
Financing costs (30) - (30)
Operating profit 8,658 - 8,658
Loss from sale of discontinued operations - (567) (567)
Finance income 97 - 97
Finance costs (2,153) - (2,153)
Profit before taxation 6,602 (567) 6,035
The corporate recharge to the business unit EBITDA is allocated on a head
count basis.
The segment results by business unit for the year ended 31 October 2021:
Continuing Operations Discontinued Operations
Total CONTENT
PSS EIM £000 £000 Total
£000 £000 £000
Revenue 54,114 8,071 62,185 3,897 66,082
Earnings before depreciation, amortisation, restructuring, acquisition costs, 17,969 1,550 19,519 276 19,795
impairment, financing costs and share option costs
Depreciation (751) (36) (787) (14) (801)
Depreciation - right-of-use-assets (709) (85) (794) (227) (1,021)
Amortisation - software licences and R&D (4,193) (869) (5,062) (46) (5,108)
Amortisation - acquired intangibles (3,210) (351) (3,561) (166) (3,727)
Restructuring costs 98 (8) 90 (11) 79
Acquisition costs 134 - 134 - 134
Share option costs (1,760) (29) (1,789) (119) (1,908)
Segment operating profit / (loss) 7,578 172 7,750 (307) 7,443
Financing costs (110) - (110)
Operating profit / (loss) 7,640 (307) 7,333
Gain from sale of discontinued operations - 6,239 6,239
Finance income 818 - 818
Finance costs (1,190) (14) (1,204)
Profit before taxation 7,268 5,918 13,186
The corporate recharge to the business unit EBITDA is allocated on a head
count basis with the exception of Content, which has had corporate costs
reduced to avoid stranded costs.
4 DISCONTINUED OPERATIONS
During the first six months of the year ended 31 October 2021, the Group
received separate offers to acquire its Continental Compliance operations, and
its Netherlands Grants Consultancy operations. These operations collectively
comprised the Idox Content division of the Group. These offers were at an
acceptable valuation and given the Group's desire to prioritise capital on its
Idox Software operation, these disposals were completed in the year.
The Continental Compliance operations were disposed on 12 March 2021 and the
Netherlands Grants Consultancy operations were disposed on 6 April 2021. These
dates represent the point the control and legal ownership of these operations
passed to the acquirers.
The results of the discontinued operations, which have been excluded in the
consolidated income statement, were as follows:
2022 2021
£000 £000
Revenue - 3,897
Expenses - (4,218)
(Loss) / gain on Disposal (567) 6,239
Profit before tax (567) 5,918
Attributable tax expense - -
Net profit attributable to discontinued operations (567) 5,918
Loss on disposal in the current year are related to finalisation costs
associated with the disposal of the Content businesses in FY21.
During the year, Content contributed £0.1m (2021: £2.7m) to the Group's net
operating cash flows and incurred £0.1m (2021: £10.7m contributed) in
respect of investing and financing activities.
5 EARNINGS PER SHARE
The earnings per ordinary share is calculated by reference to the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during each period, as follows:
Continuing Operations 2022 2021
£000 £000
Profit for the year 5,611 6,031
Basic earnings per share
Weighted average number of shares in issue 443,413,006 440,376,576
Basic earnings per share 1.27p 1.37p
Weighted average number of shares in issue 443,413,006 440,376,576
Add back:
Dilutive share options 8,636,936 10,749,077
Weighted average allotted, called up and fully paid share capital 452,049,942 451,125,653
Diluted earnings per share
Diluted earnings per share 1.24p 1.34p
Adjusted earnings per share 2022 2021
£000 £000
Profit for the year 5,611 6,031
Add back:
Amortisation on acquired intangibles 3,670 3,561
Acquisition costs 183 (134)
Restructuring costs 470 (90)
Financing costs 30 110
Share option costs 2,584 1,789
Tax rate changes - 826
Tax effect (1,533) (1,841)
Adjusted profit for year 11,015 10,252
Weighted average number of shares in issue - basic 443,413,006 440,376,576
Weighted average number of shares in issue - diluted 452,049,942 451,125,653
Adjusted earnings per share 2.48p 2.33p
Adjusted diluted earnings per share 2.44p 2.27p
Discontinued Operations 2022 2021
£000 £000
Profit for the year (567) 5,918
Basic earnings per share
Weighted average number of shares in issue 443,413,006 440,376,576
Basic earnings per share (0.13)p 1.34p
Weighted average number of shares in issue 443,413,006 440,376,576
Add back:
Dilutive share options 8,636,936 10,749,077
Weighted average allotted, called up and fully paid share capital 452,049,942 451,125,653
Diluted earnings per share
Diluted earnings per share (0.13)p 1.31p
Total Operations 2022 2021
£000 £000
Profit for the year 5,044 11,949
Basic earnings per share
Weighted average number of shares in issue 443,413,006 440,376,576
Basic earnings per share 1.14p 2.71p
Weighted average number of shares in issue 443,413,006 440,376,576
Add back:
Dilutive share options 8,636,936 10,749,077
Weighted average allotted, called up and fully paid share capital 452,049,942 451,125,653
Diluted earnings per share
Diluted earnings per share 1.11p 2.65p
Adjusted earnings per share 2022 2021
£000 £000
Profit for the year 5,044 11,949
Add back:
Amortisation on acquired intangibles 3,670 3,727
Acquisition costs 183 (134)
Restructuring costs 1,037 (6,318)
Financing costs 30 110
Share option costs 2,584 1,908
Tax rate changes - 826
Tax effect (1,533) (1,911)
Adjusted profit for year 11,015 10,157
Weighted average number of shares in issue - basic 443,413,006 440,376,576
Weighted average number of shares in issue - diluted 452,049,942 451,125,653
Adjusted earnings per share 2.48p 2.31p
Adjusted diluted earnings per share 2.44p 2.25p
6 INTANGIBLE ASSETS
Goodwill Customer relation- Trade names Software Develop-ment costs Order backlog Customer lists Total
Ships
£000 £000 £000 £000 £000 £000 £000 £000
Cost
At 1 November 2020 79,728 31,958 12,593 23,058 23,987 312 278 171,914
Foreign exchange - - - (1) (88) (10) (18) (117)
Additions - - - 56 4,588 - - 4,644
Additions on acquisition 7,775 5,808 - 6,192 422 - - 20,197
Disposals (4,893) (2,920) (877) (906) (870) - (260) (10,726)
At 31 October 2021 82,610 34,846 11,716 28,399 28,039 302 - 185,912
Foreign exchange - - - - 11 31 - 42
Additions - - - 144 6,503 - - 6,647
Additions on acquisition 756 - - 987 - - - 1,743
Fair value adjustment 982 - - - - - - 982
At 31 October 2022 84,348 34,846 11,716 29,530 34,553 333 - 195,326
Amortisation
At 1 November 2020 31,709 20,827 9,240 15,554 12,342 312 278 90,262
Foreign exchange - - - (1) (78) (10) (18) (107)
Amortisation for the year - 1,321 612 2,676 4,226 - - 8,835
Disposals - (2,530) (762) (775) (776) - (260) (5,103)
At 31 October 2021 31,709 19,618 9,090 17,454 15,714 302 - 93,887
Foreign exchange - - - - 11 31 - 42
Amortisation for the year - 1,513 423 2,285 4,766 - - 8,987
At 31 October 2022 31,709 21,131 9,513 19,739 20,491 333 - 102,916
Carrying amount at 31 October 2022 52,639 13,715 2,203 9,791 14,062 - - 92,410
Carrying amount at 31 October 2021 50,901 15,228 2,626 10,945 12,325 - - 92,025
Average remaining amortisation period (years)
31 October 2022 n/a 9.1 5.2 4.3 3.0 - -
31 October 2021 n/a 12.0 4.3 3.8 2.9 - -
During the year, goodwill and intangibles were reviewed for impairment in
accordance with IAS 36, 'Impairment of Assets'. An impairment charge of £Nil
(2021: £Nil) was processed in the year.
Fair value adjustments are in relation to the finalisation of acquisition
accounting in respect of exeGesIS Spatial Data Management Ltd.
Impairment test for goodwill
For this review, goodwill was allocated to individual Cash Generating Units
(CGUs) on the basis of the Group's operations as disclosed in the segmental
analysis. As the Board reviews results on a segmental level, the Group
monitors goodwill on the same basis.
The carrying value of goodwill by each CGU is as follows:
2022 2021
Cash Generating Units £000 £000
Public Sector Software (PSS) 42,665 40,927
Engineering Information Management (EIM) 9,974 9,974
52,639 50,901
The recoverable amount of all CGUs has been determined using value-in-use
calculations. These calculations use pre-tax cash flow projections based on
financial budgets approved by management covering the next five financial
years. The key assumptions used in the financial budgets relate to revenue and
EBITDA growth targets. Cash flows beyond this period are extrapolated using
the estimated growth rates stated below. Growth rates are reviewed in line
with historic actuals to ensure reasonableness and are based on an increase in
market share.
For value-in-use calculations, the growth rates and margins used to estimate
future performance are based on financial year 2023 budgets (as approved by
the Board) which is management's best estimate of short-term performance based
on an assessment of market opportunities and macro-economic conditions. In the
year to 31 October 2022, the Weighted Average Cost of Capital for each CGU has
been used as an appropriate discount rate to apply to cash flows. The same
basis was used in the year to 31 October 2021.
The assumptions used for the value-in-use calculations are as follows and are
considered appropriate for each of the risk profiles of the respective CGUs:
Cash Generating Units Discount rate Compound Annual Growth Rate Long term growth rate Discount rate Growth rate Prior year
Current year Current year Prior year
PSS 15.9% 14.8% 2.2% 12.4% 1.7%
EIM 16.9% 11.7% 2.2% 13.5% 1.7%
Individual Weighted Average Costs of Capital were calculated for each CGU and
adjusted for the market's assessment of the risks attaching to each CGUs cash
flows. The Weighted Average Cost of Capital is recalculated at each period
end.
Management considered the level of intangible assets within the Group in
comparison to the future budgets and have processed an impairment charge of
£Nil within the year (2021: £Nil).
Management have specifically considered the past financial performance of the
EIM CGU which has seen revenue decreases following market challenges in the
Oil and Gas sectors. Reported EIM revenues have also been impacted by the
non-renewal of some existing customers in the first half of the year. However,
the business closed some new contracts in the second half of the year which
did not have a significant impact in year but FY23 will benefit from the full
year impact. Management anticipates a return to revenue growth in FY23 as a
result of the high levels of recurring revenue going into the year and a
strong pipeline. In the event the EIM CGU does not achieve revenue growth in
FY23 as anticipated, this may give rise to an impairment in the carrying value
of the EIM CGU assets.
The Group has conducted sensitivity analysis on the impairment test of each
CGU and the group of units carrying value. Sensitivities have been run on the
discount rate applied and management are satisfied that a reasonable increase
in the discount rate used would not lead to the carrying amount of each CGU
exceeding the recoverable amount.
Sensitivities have been conducted on cash flow forecasts for all CGUs EBITDA
by 10%. Management are satisfied that this change would not lead to the
carrying amount of each CGU exceeding the recoverable amount. Sensitivities
have also been conducted on cash flow forecasts for all CGUs reducing the
growth rate to 0%. Management are satisfied that this change would not lead to
the carrying amount of each CGU exceeding the recoverable amount.
In relation to EIM, in the event a combination of all the sensitivities occur,
this would give rise to an impairment if the scenarios gave rise to a 21%
reduction in our forecast projections; however, the Directors have concluded
the likelihood of this is remote.
Management have further considered the CGUs for which prior period impairments
were recorded to reduce the value-in-use of those CGUs to their recoverable
amount, and how such carrying values are subject to the current year
sensitivities noted above.
Whilst the current year impairment reviews and sensitivities have not provided
any indicators of further impairment on these assets, management have
considered whether a reversal of the prior period impairment is required and
concluded this is not appropriate at this time due to the ongoing
transformation and improvement of those businesses.
7 ACQUISITIONS
LandHawk
On 1 October 2022, the Group acquired the entire share capital of LandHawk
Software Services Limited.
LandHawk allows clients to identify off-market land opportunities effectively
and efficiently by bringing together geospatial intelligence in a
user-friendly cloud-native software solution. Whilst allowing clients to
complete development feasibility studies, LandHawk also provides GIS data
directly to clients for use in their own applications, alongside a managed
service to support clients in sourcing off-market land. This customer base
provides new market opportunities for Idox and is a complimentary extension of
its existing local authority land and property base.
Goodwill arising on the acquisition of LandHawk has been capitalised and
consists largely of the value of the synergies and economies of scale expected
from combining the operations of LandHawk with Idox. None of the goodwill
recognised is expected to be deductible for income tax purposes. The purchase
of LandHawk has been accounted for using the acquisition method of accounting.
Book value Fair value
£000 £000
Trade receivables 13 13
Other receivables 7 7
Cash at bank 25 25
Total Assets 45 45
Trade payables (16) (7)
Other liabilities (48) (48)
Contract liabilities (10) (10)
Social security and other taxes (50) (50)
Deferred tax liability (247) (247)
Total Liabilities (371) (362)
Net Assets (317)
Goodwill arising on acquisition 756
Purchased software capitalised 987
Total consideration 1,426
Satisfied by:
Cash to vendor 1,050
Earnout consideration 376
1,426
The revenue included in the consolidated statement of comprehensive income
since 1 October 2021 contributed by LandHawk was £4,000. LandHawk also made a
loss after tax of £14,000 for the same period. If LandHawk had been included
from 1 November 2021, it would have contributed £71,000 to Group revenue and
a profit after tax of £11,000.
Acquisition costs of £56,000 have been written off in the consolidated
statement of comprehensive income.
exeGesIS
During the year there has been further fair value adjustment in respect of the
acquisition of exeGesIS Spatial Data Management Limited. The adjustment
totalled £982,000.
Adjustments were processed to ensure pre-acquisition related costs were
recognised in the correct period. This resulted in an adjustment of (£33,000)
in respect of working capital movements and £1,015,000 in respect of tax
adjustments.
8 POST BALANCE SHEET EVENTS
There have been no post balance sheet events which had a material impact on
the Group.
9 ADDITIONAL INFORMATION
Related Party Transactions
No related party transactions have taken place during the year that have
materially affected the financial position or performance of the Company.
Principal Risks and Uncertainties
The principal risk and uncertainties facing the Group together with the
actions being taken to mitigate them and future potential items for
consideration are set out in the Strategic Report section of the Annual
Financial Report 2022.
10 ALTERNATIVE PERFORMANCE MEASURES
Within these financial statements, the Group makes reference to Alternative
Performance Measures (APMs) which are not defined or specified under
International Financial Reporting Standards. The Group uses these APMs as this
is in line with the management information requested and presented to the
decision makers in our business; and is consistent with how the business is
assessed by our debt and equity providers. Details are included within the
financial review section of the Strategic Report.
The following table reconciles these APMs to statutory equivalents for
continuing operations:
2022 2021
£000 £000
Adjusted EBITDA:
Profit before taxation 6,602 7,268
Depreciation and Amortisation 10,584 10,204
Restructuring costs 470 (90)
Acquisition costs 183 (134)
Financing costs 30 110
Share option costs 2,584 1,789
Net finance costs 2,056 372
Adjusted EBITDA 22,509 19,519
Free cashflow:
Net cashflow from operating activities after taxation 15,647 16,554
Capex (7,558) (5,747)
Lease payments (927) (1,154)
Free cashflow 7,162 9,653
Net debt:
Cash (13,864) (18,283)
Bank borrowings 9,201 15,394
Bonds in issue 11,325 10,998
Net Debt 6,662 8,109
Adjusted profit for the year and adjusted earnings per share:
Profit for the year 5,611 6,031
Add back:
Amortisation on acquired intangibles 3,670 3,561
Acquisition costs 183 (134)
Restructuring costs 470 (90)
Financing costs 30 110
Share option costs 2,584 1,789
Tax rate changes - 826
Tax effect (1,533) (1,841)
Adjusted profit for year 11,015 10,252
Weighted average number of shares in issue - basic 443,413,006 440,376,576
Weighted average number of shares in issue - diluted 452,049,942 451,125,653
Adjusted earnings per share 2.48p 2.33p
Adjusted diluted earnings per share 2.44p 2.27p
The following table reconciles these APMs to statutory equivalents for total
operations:
2022 2021
£000 £000
Adjusted EBITDA:
Profit before taxation 6,035 13,186
Depreciation and Amortisation 10,584 10,657
Restructuring costs 1,037 (6,318)
Acquisition costs 183 (134)
Financing costs 30 110
Share option costs 2,584 1,908
Net finance costs 2,056 386
Adjusted EBITDA 22,509 19,795
Free cashflow:
Net cashflow from operating activities after taxation 15,647 16,554
Capex (7,558) (5,747)
Lease payments (927) (1,154)
Free cashflow 7,162 9,653
Net debt:
Cash (13,864) (18,283)
Bank borrowings 9,201 15,394
Bonds in issue 11,325 10,998
Net Debt 6,662 8,109
Adjusted profit for the year and adjusted earnings per share:
Profit for the year 5,044 11,949
Add back:
Amortisation on acquired intangibles 3,670 3,727
Acquisition costs 183 (134)
Restructuring costs 1,037 (6,318)
Financing costs 30 110
Share option costs 2,584 1,908
Tax rate changes - 826
Tax effect (1,533) (1,911)
Adjusted profit for year 11,015 10,157
Weighted average number of shares in issue - basic 443,413,006 440,376,576
Weighted average number of shares in issue - diluted 452,049,942 451,125,653
Adjusted earnings per share 2.48p 2.31p
Adjusted diluted earnings per share 2.44p 2.25p
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