REG - IDOX PLC - Final Results
25/01/2024 07:00
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RNS Number : 8352A IDOX PLC 25 January 2024
25 January 2024
Idox plc
('Idox' or the 'Group' or the 'Company')
FY23 Results
"A strong financial performance in line with expectations"
Idox plc (AIM: IDOX), a leading supplier of specialist information management
software and geospatial data solutions to the public and asset intensive
sectors, is pleased to report its financial results for the year ended 31
October 2023.
Financial highlights
Reconciliations between adjusted and statutory earnings are contained at the
end of this announcement.
Revenue
· Revenue increased by 11% to £73.3m (2022: £66.2m), driven by
growth in Land, Property & Public Protection (LPPP).
· Recurring revenue(1) increased by 8% to £43.6m (2022: £40.5m),
accounting for 60% of the Group's total revenue (2022: 61%).
Profit
· Adjusted(2) EBITDA increased by 9% to £24.5m (2022: £22.5m).
· Adjusted(2) EBITDA margin stable at 33% (2022: 34%).
· Statutory operating profit increased by 8% to £9.3m (2022:
£8.7m).
· Statutory operating profit margin unchanged at 13% (2022: 13%).
· Statutory profit before tax increased by 18% to £7.8m (2022:
£6.6m).
· Adjusted(3) diluted EPS increased by 7% to 2.62p (2022: 2.44p).
· Statutory diluted EPS decreased by 1% to 1.23p (2022: 1.24p).
Cash and debt
· Net debt(4) at 31 October 2023 was £14.7m (2022: £6.7m),
following payment of the initial cash consideration (£14.8m) for the Emapsite
acquisition in August 2023.
· Cash generated from operating activities before taxation
represented 82% of Adjusted EBITDA (2022: 81%).
· Free cashflow(5) generation of £9.1m (2022: £7.2m).
· Refinancing completed in October 2023 for a £75m revolving credit
facility and £45m accordion, providing the Group with significantly increased
resources to fund strategic M&A ambitions.
Dividend
· Proposed final dividend increased by 20% to 0.6p per share (2022:
0.5p), reflecting our strong financial position and our confidence in the
future.
Operational highlights
Another strong performance in line with expectations despite the backdrop of
continued geo-political and macro-economic uncertainty:
· Record full year order intake up 10% on FY22 to £82m, reflecting
our high-quality customer base and, providing good visibility into FY24.
· New divisional structure has created a much better focus for our
customer engagement, product strategy and marketing, delivering an improved
sales performance.
· Idox's Geospatial capabilities were further enhanced with the
acquisition of Emapsite and the continued development of thinkWhere &
Landhawk which have continued to onboard new projects and customers.
· Upscaling and embedding our India operations across the business
continued throughout the year, with colleague growth in India up over 20% as
we build upon our strong capabilities and future development plan.
· Customer engagement and communication has been a key part of our
work in 2023 focussing on our strong customer relationships and market
position.
Current trading and outlook
· With a strong foundation in property and asset-based solutions and
data services we will continue to invest selectively to enhance and grow our
capabilities, building on the Group's already strong recurring revenues.
· Attractive M&A pipeline with significant financial resources
for larger, accretive and enhancing acquisitions at appropriate valuations.
· Encouraging start to FY24, with trading in line with the Board's
expectations and we remain confident about the outlook for the year.
David Meaden, Chief Executive of Idox said:
"We are pleased that Idox has delivered double-digit revenue growth and seen
an increase in recurring revenue and order intake this year. Our work in
previous years, refocusing Idox as a software business and improving the
quality of the Group, has created a fly-wheel effect where we continue to
deliver consistently strong margins and cash generation.
The acquisition of Emapsite has strengthened our geospatial offering,
providing opportunities to cross sell our existing capabilities to new markets
and deliver high quality data services to our existing clients.
We have made an encouraging start to FY24, trading in line with the Board's
expectations. We will continue to invest selectively to grow our capabilities
and support our customers.
We have increased financial resources at our disposal for accretive and
enhancing acquisitions and have shown that this can be delivered successfully.
Whilst recognising this is likely to be an election year, we remain confident
about the outlook for the year ahead."
There will be a webcast at 11:00am 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 Officer
Anoop Kang, Chief Financial Officer
Peel Hunt LLP (NOMAD and Broker) +44 (0) 20 7418 8900
Paul Gillam
Michael Burke
MHP Communications + 44 (0) 20 3128 8100
Reg Hoare idox@mhpgroup.com (mailto:mhpc@idoxgroup.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 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.
(2) Adjusted EBITDA (earnings before interest, tax, depreciation and
amortisation) 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
commonly used 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. This differs from a similar measure under IFRS, which would
also include lease liabilities as debt. The definition used is consistent with
that used within the Group's banking arrangements.
(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 2023. Note references
refer to notes included in this Annual Financial Report Announcement 2023.
Chair's statement
Introduction
I am very pleased to be able to report another positive set of results to all
of our shareholders and other stakeholders for the financial year ending 31
October 2023. This is the 5th year in a row that we have grown revenues and
Adjusted EBITDA, with very good cash generation. This is an excellent track
record delivered by the whole Idox team. The business has maintained its
trajectory of improving our core, organic metrics whilst continuing with a
very focused acquisition programme. All the acquisitions that we have made
have grown our addressable market so that we can continue to find new growth
opportunities whilst continuing to benefit from the solid foundations of our
strong core market positions. This strength is evidenced through our recurring
revenue, our margins, and cash generation.
This has been a year of stability in the Boardroom, with no changes to our
Executive and Non-Executive Directors. However, we continue to enjoy a healthy
level of challenge and debate. We have made sure that the other Non-Executive
Directors (NEDs) and I engage directly with shareholders on a regular basis,
taking on board their feedback and ensuring that their views are reflected in
the direction of the business. We have also engaged independent external
advisors to review our Board practices and our remuneration policies.
2023 has been a quieter year in the number of acquisitions that we have
completed, but we were pleased to be able to complete the acquisition of
Emapsite in August. Emapsite is an excellent business, and their offerings
dovetail well with those of our previous acquisitions and our original
capabilities in the geospatial data management space. The acquisitions of
Aligned Assets, thinkWhere, exeGesIS, LandHawk and now Emapsite put Idox in a
very strong position to build exciting new revenue streams around our core
assets in property data management. The market opportunity created by the
combination of these capabilities is large, and it will be a major focus of
investment for the Group in the years to come.
It was also pleasing to see the continuing impact of our earlier acquisitions,
with our Cloud solution, built on the Tascomi platform that we acquired in
2019 delivering 18 new customer wins and enabling the migration of eight
existing customers from an on-premise solution to our Cloud offering.
Performance towards achieving our internal goal of 35% Adjusted EBITDA margin
was stable at 33%. We still have some improvements to come in that area
through the benefits of the integration of our previous acquisitions, which
are not yet fully realised. However, revenue growth of 11%, with recurring
revenue up 8% over the period, delivering a 9% increase in full year Adjusted
EBITDA is a pleasing set of results. To be able to deliver such a strong core
performance whilst at the same time increasing the addressable market
opportunity is an excellent performance. 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.
Like nearly every business, Idox is continuing to work on finding the optimal
working pattern for our colleagues in the post-covid world. We have to make
sure that we have the right blend of home and office work, and essential and
non-essential travel, that allows our colleagues to be efficient but also
continue to benefit from the lifelong development and learning opportunities
that are an important part of corporate, office life. 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 have 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.
Cultural development is an essential part of this value. It is not only
important for the employees themselves that we create a strong and thriving
culture, where all of our colleagues feel valued and appreciated, but it is
also an essential component in delivering value to our customers. It is clear
to me that customers know when they are supported by an organisation that has
a strong and positive culture, and indeed cultural alignment can be a very
strong driver of customer satisfaction. Idox has a very clear set of shared
values, that hold quality, customer value, owning commitments and "doing the
right thing" as essential and non-negotiable elements of the Idox experience.
It is with these values in mind that we continue to develop talent within the
business creating an environment where growth and innovation is a natural
output of our work together.
Group Strategy
The Group continued its focus on providing digital solutions and services to
the LPPP public sector customers in the United Kingdom, complemented by our
Assets & Communities sectors servicing customers across the world.
However, we are increasingly focused on the broader geospatial data market.
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 attractive
acquisition opportunities that can enhance the Group's scale and capabilities,
and the integration of completed acquisitions, is a key part of management
focus and effort.
Board
There has been no change to the Board in FY23, as reported above. I consider
the effectiveness of the Board, which includes the contributions of the
individual board members, throughout the annual governance cycle. The current
Board members continue to collectively function in an efficient and productive
manner.
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.
Dividends
The Board has proposed an increased final dividend of 0.6p (2022: 0.5p) for
FY23. Subject to approval at the AGM, the final dividend will be paid on 12
April 2024 to shareholders on the register as at 2 April 2024. 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 attractive markets, with strong market positions
and insights, and we have every confidence that we can continue the excellent
progress we have seen in FY23. The changes that we have made in the last few
years, to the team, our structure, systems, and processes have delivered a
major improvement in our financial performance. As a result, we have enjoyed
improved stability in performance and confidence for the future, based on
strongly improving orderbooks and levels of recurring revenue. On top of this,
we can now point to exciting growth opportunities in the geospatial data
markets. 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 Emapsite, 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
Chair
Chief Executive's review
Continuing progress
The Chair has reported on the significant progress at Idox over the past five
years. This has been delivered through a well-defined strategy, articulated
through our Four Pillars and Walk, Run, Fly phases.
By refocussing Idox as a software business, with leading positions in our
chosen markets, we have substantially improved the overall quality of our
business. This clear focus has delivered strong margins and cash generated by
operations, and a stronger balance sheet.
From this position, it seems obvious that we would have achieved this
substantially improved performance, but of course, this achievement was not a
given. It has required discipline and years of continuous improvements and
perseverance to create a fly wheel effect, delivering the positive momentum we
now have.
The credit for this improvement should be given to the teams across Idox that
have committed themselves to the journey and for the high quality of work and
service that they provide each day. In turn, we have supported a powerful
leadership and mentoring programme, alongside a wide range of development and
common interest-based programmes suggested by our teams, which have focussed
on building affinity groups and supportive allies across the business who are
passionate about championing inclusion and belonging for all our colleagues.
When I first arrived as CEO, I could see a tremendous amount of work being
undertaken across the business, but the results did not reflect the dedication
or efforts of our teams. Today, I feel that our efforts are being reflected in
our operational and financial performance and I am grateful to all our teams
that have contributed so positively to our ongoing success.
We continue to be a 'rule of 40' business, where the combination of revenue
growth rate plus Adjusted EBITDA margin equates to forty per cent, or more,
and I am pleased that we continued to deliver against this goal with revenue
growth at 11% and Adjusted EBITDA margin at 33%.
We are now at the natural conclusion of the walk, run and fly strategy and we
are excited for the future, based upon the strong foundations we have
established. We look forward to fortifying the foundations we have built and
cultivating our future trajectory.
Fortifying the foundations: focus on the future
Over the past 12 months we have significantly increased our recurring revenue
(8%) and sales order intake (10%), providing greater visibility of future
revenues.
We should acknowledge that the conditions surrounding several of the markets
in which we operate have been challenging. The higher inflationary
environment, along with the continued uncertainty and disruption from global
conflicts and higher interest rates have impacted confidence and created some
uncertainty over long-term Government taxation and spending plans.
Several local authorities have signalled they are finding it more difficult to
run operations with a balanced budget and we have seen a small number of
Councils issue Section 114 notices, indicating their need to restructure
operations and temporarily restrict spending on new projects. However, faced
with these challenges, our clients look to software and technology solutions
to improve automation, insight, and efficiency in their operations. We take
great pride in providing the software engines that drive our local authority
clients forward and we are delighted that they continue to build their future
software and data strategies around them. As long-term partners in our
markets, retention across all our solutions and clients remains very high.
In addition to our core markets, we are focussed on delivering against new
software and data opportunities in associated addressable markets. Despite the
current economic challenges, we believe the next decade will bring significant
opportunities for geospatial software and data as well as for software and
data 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 land and property data and processes.
As such, we were delighted to acquire the Emapsite business and to welcome the
team to Idox where they add to our substantial geospatial capabilities built
through the acquisition of thinkWhere, LandHawk, Aligned Assets and exeGesIS.
Importantly, the acquisition of Emapsite provides us with the opportunity to
cross sell our existing capabilities to new markets and deliver high quality
data services to our existing clients.
Cultivating our future trajectory: supporting growth
During the year, we increased the capital available to the Group for M&A
by entering a new, larger revolving credit facility and accordion of £75m and
£45m respectively. Following a rigorous process, we are pleased to continue
the positive relationship with our banking partners, HSBC Innovation Bank,
NatWest and Santander. We invest our time in these relationships and feel that
the engagement has helped them understand our strategic intent, while allowing
us to access their knowledge pools more effectively to the benefit of all
parties. We are grateful for their continued support.
Further scale in our operations would provide more scope for increasing growth
rates and for further margin improvement, leveraging our sales and marketing,
software development and operations to add real value to shareholders and the
markets we serve. We continue to pursue several acquisition opportunities that
would contribute greater scale and capabilities to the Group, always mindful
of their alignment with our strategy and at the same time, maintaining a
disciplined approach to valuation.
People
We endeavour to make Idox a great place to work and a place where team members
can meet their career aspirations. Our collective ambition also demands that
we are an attractive business for new talent that can raise the bar on what
can be expected and delivered. As such, we prioritise communication and
engagement across the Group. The CEO Broadcasts are a significant part of that
pillar and are well attended. Our 'Dare to be Different' survey, aimed at
making Idox an inclusive workplace allowing everyone to be their best selves
has also been well supported and shaped much of our thinking in areas such as
work support and recruitment practice. Alongside our Workplace Wellbeing team
and Idox Elevate, the networks that have come together to support Pride@Idox
and Neurodiversity@Idox are designed to raise awareness of the issues faced by
these communities, share learning and understanding of how to be inclusive to
those that identify as such, and to provide a safe space for colleagues to
converse confidentially.
Outlook
We have made an encouraging start to FY24, trading in line with the Board's
expectations. We will continue to invest selectively to grow our capabilities
and support our customers.
We have increased financial resources at our disposal for larger, accretive
and enhancing acquisitions and have shown that this can be delivered
successfully. We remain confident about the outlook for the year ahead.
David Meaden
Chief Executive Officer
Chief Operating Officer's review
Overview
I am pleased to provide an operational update and to report a successful year
of progress at Idox.
The divisional structure announced last year has delivered a focussed platform
for clear commercial and strategic ownership for business units. Within each
division we now have strong leadership and a clear market focus, with
responsibility for all sales, marketing, product strategy & customer
engagement. The appointed Divisional Directors have exceptional domain
expertise and experience in each of the operating areas and have helped
provide a focus for the business throughout the year whilst also building long
term strategies to meet our future growth aspirations.
We have scaled the Group operationally across service horizontals too,
including engineering, customer success & our offshore operations in
India. This has improved our performance, utilisation levels and access to
shared technologies and resources which is leading to better outcomes for our
customers and improving our overall customer experience and effectiveness.
At Idox, we have successfully maintained an operating model with colleagues
working in a hybrid capacity which sees our colleagues working from both
office locations and home where roles allow. We also recognise the significant
benefits of working closely with both colleagues and customers face-to-face,
which we have seen much more of throughout the last 12-month period.
We continue to champion our Four Pillars strategy to underpin our ongoing
operations; it ensures that our decision making remains correctly balanced
when making key decisions within the business.
Revenue
We continue to focus on long-term sustainable growth across the business.
The divisional structure has ensured that we operate with a targeted emphasis
on the quality of revenues, and we have strategic alignment of product
strategy with the needs and requirements of our customers helping to drive
this.
We operate with strong and robust processes and business controls to ensure
that order intake and subsequent revenues are not only appropriate and in line
with our policy and core values but also build solutions and commercial
approaches to strengthen on our annually recurring revenues and long-term
value.
This approach has helped deliver a growth rate of 8% for annual recurring
revenues across the Group.
This year we welcomed 177 new organic customers to the Group and saw our
overall order intake grow to over £82m (+10%), which is ahead of our revenues
for FY23; building orderbook and securing future revenues.
In the Land, Property & Public Sector Division, we lead the market in the
provision of SaaS platforms for the built environment & public protection
(including Licencing and Trading Standards) through our Idox Cloud solution,
securing 18 New Customers to our service. New customers to the platform
included Harrow Council, Conwy County Borough Council and Blackburn with
Darwen Borough Council. We have also experienced strong and continued
conversion from Idox legacy platforms, with some long standing customers
converting to Idox Cloud including Rushmoor Borough Council, Royal Borough of
Windsor & Maidenhead and Dorset Council. This all made for a pleasing
performance for Idox Cloud in FY23, with sales order intake up 25%, revenue up
26% and recurring revenue up over 30% when compared to FY22.
The provision of cloud services to our existing customer base also performed
strongly in FY23 with many taking advantage of our private cloud facilities to
provide a secure service for existing platforms, including East Lothian
Council and Norwich City Council.
Other areas of the Land, Property & Public Protection Division performed
well too. Address Management order intake was up over 29% by securing key
deals across several markets, including Cadent Gas in the utilities sector. In
our specialist Countryside Access Management solution we saw key wins with
Snowdonia National Park Authority and some significant projects with Natural
England and the National Trust where our specialist solutions and knowledge
are bringing together complex data and GIS capabilities.
In our Geospatial offering, the acquisition of Emapsite significantly extended
our sales capabilities and market reach, including a significant customer
base. This acquisition also improved our access data and software experience,
adding to our already growing knowledge and Geospatial expertise.
Progress and sales have remained strong in Emapsite over the last 10-weeks of
the year, with our largest customer for geospatial data services, CityFibre,
agreeing new contracts for the development of its fibre network planning
insights programme and support for their statutory roadwork management
obligations. We also saw new agreements for Scottish Power Renewables, Realyse
and Wales & West Utilities, who are leveraging our unique Ordinance Survey
data, mapping and addressing insights.
thinkWhere continued to provide Geospatial services throughout the year for
some of the most complex and demanding projects, underpinned by our GIS
solution Ground Mapper. This included new and exciting projects at Tillhill
Forestry, Eurogeographics & National Collection of Ariel Photography.
thinkWhere revenues and order intake were up significantly on the previous
year, with a number of new projects secured. In addition to the continued
maintenance of its long-term relationships with Savills, British Library and
other customers, this helped build momentum throughout FY23, growing recurring
revenue YoY by 21% and building a strong orderbook for FY24.
Our Communities Division saw good progress in our Social Care solutions and
services with revenues up on prior years performance by 15%. New wins to the
solutions included City of Bradford Metropolitan Borough Council and Doncaster
Metropolitan Borough Council as well as strong customer retention. This strong
performance was continued in our Sexual Health solution 'Lilie', with
recurring revenue up 10% on the prior year, through our partnership work with
providers, Virgin Care Service, Brook and Cambridge Community Services.
In Elections, with the lack of any major events or elections, we saw our
overall revenues reduce by 26%, however, our customer renewal and re-sign
strategy was strong, with order intake up 30% compared to the previous year.
We continued to deliver on our strong relationship with Department for
Levelling Up Housing and Communities (DLUHC) too, for changes to the overall
election management systems, in accordance with legislative changes. We also
saw some strong improvement in the quality of earnings across the revenues
resulting in an increase in margin despite the lower overall revenue
performance.
Our Databases solutions continued to attract new customers, particularly in
higher education where our ResearchConnect solution provides services, this
led to Idox securing over 136 new customers up 10% on the prior year and SaaS
revenues growing by over 14% across the databases business.
The formation of the Assets division has provided a great opportunity for
shared technologies and cross-sell between platforms. EIM revenues were up 4%
on the previous year, and new business sales were up over 16%, with 17 new
customers and the EIM orderbook is up significantly (17%) going into FY24. New
names included impressive projects with Elecnor, VME Process Inc. and Port
Praski, as well as continued support from long-term customers, Wood Group,
Duke Energy Corporation and SNCF. Our partnership programs in the Middle East,
North Africa and parts of Europe have delivered new customers and programmes
which we expect to continue in FY24.
Late FY23 saw the launch of several programmes into the NHS markets for
specific benefit cases for the iAssets tracking solution: using the latest
technologies, incorporating IOT, Bluetooth and 4G tracking and targeting
specific equipment. Revenues for iFit were up 6% and recurring revenue
improved 8% on the prior year, helped through a strong retention strategy,
with renewals and re-signs up 9% on FY22.
Despite some of the economic pressures of the Facilities Management markets as
businesses rationalise their property portfolios, we have seen small but
continued progress with the CAFM solution, with recurring revenue growing at
3% in FY23. There are high expectations for the impending release of the new
CAFM version 12 with advanced orders already in the orderbook for completion
in the new year.
Margins
In FY23 the Adjusted EBITDA margin remained similar to the previous year at
33% (2022: 34%) and we recorded a statutory profit before tax of £7.8m (2022:
£6.6m) up 18% on the prior year and representing a statutory profit margin of
11% (2022: 10%).
We continue to invest in our people and technology at Idox, to help drive
improvements in margin and overall operational performance. We have driven
several initiatives throughout FY23 which have helped improve our productivity
and creative output, with more technology developed and released than in any
of the previous years.
It has been very pleasing to see that many colleagues who had previously
attended our Leading Together development programmes and mentoring have gone
on to take up new roles and positions across the business; this development of
our own internal talent pool and succession strategy continues to create value
for Idox through retention of our valuable resources.
We continue to invest in our India operations in Pune and our team now
represents over 11% of Group colleagues. We also maintain our strategy of
extending our capabilities in India to include all aspects of our back-office
functions.
Our new operational structure ensures that we are leveraging the entire scale
of the Group for engineering, QA, professional services, customer support and
other back-office functions. This combination maximises value of our cost base
and resources and ensures that we have access to best practice and technology
throughout the Group.
Simplification
We continue with our efforts to operate the Group as a simple and efficient
business, investing in technology to facilitate automation and streamline
processes.
The divisional structure provides the leadership required to directly drive
revenue growth and strategic product alignment through bringing the
appropriate market knowledge and domain expertise. This creates an intimacy
and important understanding of the markets that we serve and ensures that the
solutions we are bringing to market meet the operational needs of our
customers, both now and in the future.
Improving and enhancing our overall customer experience is one of our
strategic goals. We have brought together aspects of our delivery teams to
ensure we have a seamless customer experience from onboarding into our SaaS
platforms to ongoing maintenance and service delivery.
Internal systems are maintained to help provide automation and enablement,
improving our delivery, consistency, efficiency and revenue predictability.
Collaboration between teams is promoted and encouraged; this is working well
from product inception, through to development, QA, documentation and
delivery. Technology is used throughout this collaboration to stimulate and
enhance the experience for colleagues and customers alike.
We have maintained our ongoing 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 Idox remains fully accredited with Cyber Essential Plus, demonstrating
our ongoing commitment to cyber security and protection protocols.
Communication
We operate a communication strategy across all our teams that takes
consideration for the individuality and needs of our colleagues to ensure that
we have an approach that embraces and reaches everyone. We communicate with
openness and transparency and always look to address any issues and challenges
with understanding and integrity.
We believe an open communication strategy is a key contributor to a healthy
and vibrant business which actively engages colleagues and where all opinions
are aired and heard. Our CEO broadcasts have continued on a regular basis this
year, with support from other members of the Executive Team, providing updates
on programmes and progress as well as an open engagement through Q&A.
Internal technology led "show & tell" sessions have been well attended
across the business, providing insights and updates on the very latest
technical knowhow, including AI, Cyber Security and UX/UI evolution. We have
also led communication programmes across the divisional structure, engaging
and focussing on product strategy, market analysis and customer successes
stories.
We provide all colleagues with time and resources to support charities and
good causes, which we believe allows people to reflect their own interests
whilst supporting Idox values to be a socially responsible and sustainable
business. Initiatives, though our Workplace Wellbeing programme, provide
support to our colleagues and help create support and connectivity, we also
encourage colleagues to initiate and drive engagement across the business
through shared interest. These have continued to be very popular with
colleagues again in FY23 and have included photography groups, walking,
cycling, knitting and other hobbies and pastimes.
Customer engagement and communication has been a key part of our work in 2023
focussing on our strong customer relationships and market position. We use
technology to streamline our information about product strategies and software
roadmap and we have leveraged AI technologies to improve learning and training
services for our solutions. We continue to invest in our direct people
engagement and communication strategy through our customer success and account
management teams, which we believe adds significant value to our overall
customer relationships.
Given our market position we are regularly engaged with specific Government
and industry groups, where we can influence, inform and actively engage in
future changes and developments; this participation provides good early
insights and an advanced understanding of changes affecting the industry and
our customers.
The start to the new year has progressed as expected and we see good
opportunities for our continued growth throughout FY24.
Jonathan Legdon
Chief Operating Officer
Financial review
In FY23 the Group delivered a strong performance with double digit revenue
growth coupled with solid adjusted EBITDA growth and cash generation.
The Group established a new divisional structure, effective from 1 November
2022. The new structure comprising, Land, Property & Public Protection
(LPPP), Assets and Communities provides better market focus, customer service
and sharper sales execution. In accordance with IFRS 8 Operating Segments,
information is provided to the chief operating decision maker, the Board of
Directors, on this basis. Accordingly, the Group has prepared its segmental
disclosures in the same manner. In addition, the Group has re-presented
comparative information in line with the new divisional structure.
The following table sets out the revenues and Adjusted EBITDA for each of the
Group's segments from its continuing activities:
2023 2022 Variance
£000 £000 £000 %
Revenue
- LPPP 43,413 35,073 8,340 24%
- Assets 14,845 14,835 10 0%
- Communities 15,019 16,276 (1,257) (8%)
- Total 73,277 66,184 7,093 11%
Revenue split
- LPPP 59% 53%
- Assets 20% 22%
- Communities 21% 25%
- Total 100% 100%
Adjusted EBITDA*
- LPPP 13,885 13,235 650 5%
- Assets 4,199 4,450 (251) (6%)
- Communities 6,366 4,824 1,542 32%
- Total 24,450 22,509 1,941 9%
Adjusted EBITDA margin split
- LPPP 32% 38%
- Assets 28% 30%
- Communities 42% 30%
- Total 33% 34%
* Adjusted EBITDA is defined as earnings before amortisation, depreciation,
restructuring, acquisition costs, impairment, financing costs and share option
costs.
Revenues
2023 2022 Variance
£000 £000 £000 %
Revenues
- Recurring (LPPP) 24,305 21,918 2,387 11%
- Recurring (Assets) 9,692 9,730 (38) 0%
- Recurring (Communities) 9,622 8,898 724 8%
- Total recurring 43,619 40,546 3,073 8%
- Non-recurring (LPPP) 19,108 13,155 5,953 45%
- Non-recurring (Assets) 5,153 5,105 48 1%
- Non-recurring (Communities) 5,397 7,378 (1,981) (27%)
- Total non-recurring 29,658 25,638 4,020 16%
- Total continuing revenue 73,277 66,184 7,093 11%
- Recurring* 60% 61%
- Non-recurring** 40% 39%
* 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 11% in the year to
£73.3m (2022: £66.2m). LPPP was up 24% for the year at £43.4m (2022:
£35.1m), Assets has remained broadly flat with revenue of £14.8m (2022:
£14.8m) and Communities has decreased 8% to £15.0m (2022: £16.3m) as a
result of the cyclical nature of Elections related revenue.
Recurring revenues for the year increased 8% from £40.5m to £43.6m and
represented 60% (2022: 61%) of the total continuing revenue. Within LPPP,
recurring revenue increased 11% to £24.3m (2022: £21.9m). Good growth in
recurring revenue across all areas was supported by a combination of new
customers, new services to existing customers and the impact of inflation
across Idox legacy platforms, cloud transitions and address management
solutions. The recurring revenues in Assets remained stable at £9.7m (2022:
£9.7m) with growth in our facilities management and asset tracking solutions
offsetting a small reduction in our EIM solutions. Recurring revenues in
Communities improved 8% to £9.6m (2022: £8.9m), driven by growth in the
Databases solution.
Non-recurring revenues for the year increased 16% to £29.7m (2022: £25.6m).
Non-recurring revenue in LPPP increased by 45% to £19.1m (2022: £13.2m),
primarily driven by a strong in year customer contract renewals and cloud
transitions in the year. In Assets, non-recurring revenue was up 1% to £5.2m
(2022: £5.1m) where growth in EIM solutions was offset by a reduction in
transport revenue. As expected, non-recurring revenue in Communities was down
27% to £5.4m (2022: £7.4m) and driven by the absence of any major election
events in the UK and Malta in 2023.
Adjusted EBITDA increased by 9% to £24.5m (2022: £22.5m), delivering a
stable Adjusted EBITDA margin of 33% (2022: 34%), despite the impact of a high
inflationary environment throughout 2023.
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.
Profit before taxation
The statutory profit before tax was £7.8m (2022: £6.6m). The following table
provides a reconciliation between Adjusted EBITDA and statutory profit before
taxation for continuing operations.
2023 2022 Variance
£000 £000 £000 %
Adjusted EBITDA 24,450 22,509 1,941 9%
Depreciation (1,636) (1,597) (39) 2%
Amortisation - software licences and R&D (5,697) (5,317) (380) 7%
Amortisation - acquired intangibles (3,622) (3,670) 48 (1%)
Restructuring costs (378) (470) 92 (20%)
Acquisition costs (746) (183) (563) 308%
Financing costs (396) (30) (366) 1,220%
Share option costs (2,631) (2,584) (47) 2%
Net finance costs (1,524) (2,056) 532 (26%)
Profit before taxation 7,820 6,602 1,218 18%
Restructuring costs were £0.4m (2022: £0.5m). The restructuring costs in the
year are associated with further simplifications of the Group structure and
office rationalisation initiatives.
Acquisition costs of £0.7m (2022: £0.2m) relates to the acquisition of
Emapsite during the year and finalisation fees associated with the acquisition
of Aligned Assets and exeGesIS, with all payments associated with the
acquisitions now having been completed. The prior year were in relation to the
acquisition of LandHawk and finalisation fees associated with the acquisition
of Aligned Assets, thinkWhere and exeGesIS.
Financing costs of £396k (2022: £30k) relate to the refinancing of the
Group's revolving credit facility (RCF). The prior year costs incurred were in
relation to annuals fee incurred as part of the RCF.
Share option costs of £2.6m (2022: £2.6m) relate to the accounting charge
for awards made under the Group's Long-term Incentive Plan, in accordance with
IFRS 2 - Share-based Payments.
Net finance costs have decreased to £1.5m (2022: £2.1m). Increased bank
interest payable due to an increased interest environment was more than offset
by the impact of a £0.3m positive foreign exchange movement (non-cash) on the
Euro denominated bond and other non-cash movements.
The Group continues to invest in developing innovative technology solutions
across the portfolio and has capitalised development costs of £7.6m (2022:
£6.6m). The increase in the year is due to the full year impact of the FY22
acquisitions (£0.2m), with the remaining £0.8m being driven by an increase
in development work across the portfolio.
Taxation
The effective tax rate (ETR) on a statutory basis for the year was 28.6%
(2022: 16.4%).
Following the change in the statutory corporation tax rate from April 2023 to
25%, the rate applicable to the Group in FY23 was 22.5% due to the change
occurring during the financial year. The difference between the statutory rate
of 22.5% and the ETR of 28.6% is due to international losses arising in the
period and not recognised and expenses not deductible for tax purposes. As a
result, the ETR on an adjusted basis moved from 22.5% to 24.4%.
Earnings per share and dividends
Adjusted basic earnings per share for continuing operations increased 7% to
2.65p (2022: 2.48p) and adjusted diluted earnings per share increased 7% to
2.62p (2022: 2.44p). Basic earnings per share for the year was down 2% at
1.24p (FY22: 1.27p) and diluted earnings per share was down 1% at 1.23p (FY22:
1.24p).
The Board proposes a final dividend of 0.6p per share (2022: 0.5p), which
represents a total dividend for the year of 0.6p per share (2022: 0.5p), at a
total cost of £2.7m (2022: £2.3m).
Balance sheet and cash flows
The Group's net assets have increased to £73.3m compared to £67.4m as at 31
October 2022. 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 2023 £000
Total Equity as per FY22 Financial Report 67,416
Share option movements 2,592
Equity dividends paid (2,268)
Profit for the year 5,582
Exchange gains on translation of foreign operations (45)
Total Equity as per FY23 Financial Report 73,277
The Group continued to have good cash generation in the year. Cash generated
from operating activities before taxation was £20.1m (FY22: £18.3m) and as a
percentage of Adjusted EBITDA was 82% (2022: 81%). The Group generally
continues to have high levels of adjusted EBITDA to cash conversion.
Free cashflow for the year was £9.1m (2022: £7.2m). Free cashflow has
increased in the year due to the improved profitability.
2023 2022
£000 £000
Net cashflow from operating activities after taxation 18,599 15,647
Capitalisation and purchase of tangible and intangible assets (8,522) (7,558)
Lease payments (936) (927)
Free cashflow 9,141 7,162
The Group ended the year with net debt of £14.7m (2022: £6.7m), following
payment of the initial consideration of £14.8m in connection with the
Emapsite acquisition. Net debt comprised cash of £14.8m less bank borrowings
of £18.3m and the Maltese listed bond of £11.2m, which is due in June 2025.
We ended the year with a net debt to Adjusted EBITDA ratio of 0.6 times (2022:
0.3 times) with significant headroom against the Group's financial covenants.
In October 2023 the Group refinanced with the National Westminster Bank plc,
HSBC Innovation Bank Limited and Santander UK plc. The facility comprises a
revolving credit facility of £75m and a £45m accordion and is committed
until October 2026, and represents a significant increase on the previous
facilities which consisted of a revolving credit facility of £35m and £10m
accordion, respectively. The new facilities, which are on improved terms, are
for a three-year period with two extension options of one year each. The Group
retains significant liquidity with cash and available committed bank
facilities and significant financial resources to pursue its M&A strategy.
Anoop Kang
Chief Financial Officer
Note 2023 2022
£000 £000
Continuing operations
Revenue 3 73,277 66,184
Cost of sales (16,036) (15,050)
Gross profit 57,241 51,134
Administrative expenses (47,897) (42,476)
Operating profit 9,344 8,658
Analysed as:
Earnings before depreciation, amortisation, restructuring, acquisition costs, 3 24,450 22,509
impairment, financing costs and share option costs
Depreciation (1,636) (1,597)
Amortisation (9,319) (8,987)
Restructuring costs (378) (470)
Acquisition costs (746) (183)
Financing costs (396) (30)
Share option costs (2,631) (2,584)
Finance income 219 97
Finance costs (1,743) (2,153)
Profit before taxation 7,820 6,602
Income tax charge (2,238) (991)
Profit for the year from continuing operations 5,582 5,611
Discontinued operations
Loss for the year from discontinued operations - (567)
Profit for the year attributable to the owners of the parent 5,582 5,044
Other comprehensive (loss) / income for the year (45) 428
Items that may be reclassified subsequently to profit or loss:
Exchange movements on translation of foreign operations net of tax
Other comprehensive (loss) / income for the year, net of tax (45) 428
Total comprehensive income for the year 5,537 5,472
Total comprehensive income for the year attributable to owners of the parent 5,537 5,472
Earnings per share attributable to owners of the parent during the year
From continuing operations
Basic 4 1.24p 1.27p
Diluted 4 1.23p 1.24p
From continuing and discontinued operations
Basic 4 1.24p 1.14p
Diluted 4 1.23p 1.11p
The accompanying accounting policies and notes form an integral part of these
financial statements.
Note 2023 2022
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 1,339 1,380
Intangible assets 5 108,785 92,410
Right-of-use-assets 1,333 1,782
Deferred tax assets 2,541 2,679
Other receivables 1,201 -
Total non-current assets 115,199 98,251
Current assets
Trade and other receivables 21,451 17,912
Cash and cash equivalents 14,824 13,864
Total current assets 36,275 31,776
Total assets 151,474 130,027
LIABILITIES
Current liabilities
Trade and other payables 8,058 6,811
Deferred consideration 869 2,271
Current tax payable 1,422 165
Other liabilities 26,828 23,451
Provisions 589 453
Lease liabilities 220 545
Total current liabilities 37,986 33,696
Non-current liabilities
Deferred tax liabilities 7,519 6,086
Lease liabilities 958 1,265
Other liabilities 2,236 1,038
Bonds in issue 11,207 11,325
Borrowings 18,291 9,201
Total non-current liabilities 40,211 28,915
Total liabilities 78,197 62,611
Net assets 73,277 67,416
EQUITY
Called up share capital 4,562 4,525
Capital redemption reserve 1,112 1,112
Share premium account 41,558 41,556
Treasury reserve - (594)
Share option reserve 5,841 4,816
Other reserves 9,165 8,745
ESOP trust (526) (466)
Foreign currency translation reserve 194 239
Retained earnings 11,371 7,483
Total equity attributable to the owners of the parent 73,277 67,416
The financial statements were approved by the Board of Directors and
authorised for issue on 24 January 2024 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 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 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
Issue of share capital 37 - 2 - - - - - 39
Share option costs - - - - 2,611 - - - - 2,611
Exercise / lapses of share options - - - 594 (1,586) - - - 994 2
ESOP trust - - - - - - (60) - - (60)
Reallocation of deferred consideration share exercise costs - - - - - 420 - - (420) -
Equity dividends paid - - - - - - - - (2,268) (2,268)
Transactions with owners 37 - 2 594 1,025 420 (60) - (1,694) 324
Profit for the year - - - - - - - - 5,582 5,582
Other comprehensive loss
Exchange movement on translation of foreign operations - - - - - - - (45) - (45)
Total comprehensive (loss) / income for the year - - - - - - - (45) 5,582 5,537
Balance at 31 October 2023 4,562 1,112 41,558 - 5,841 9,165 (526) 194 11,371 73,277
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated cashflow statement
Note 2023 2022
£000 £000
Cash flows from operating activities
Profit for the year before taxation 7,820 6,035
Adjustments for:
Depreciation of property, plant and equipment 957 848
Depreciation of right-of-use assets 679 749
Amortisation of intangible assets 9,319 8,987
Acquisition / disposal finalisation costs 379 657
Finance income (216) (73)
Finance costs 1,532 2,034
Movement on debt issue costs (238) 119
Research and development tax credit (522) (449)
Share option costs 2,631 2,584
Profit on disposal of fixed assets - (15)
Increase in receivables (3,325) (1,316)
Increase / (decrease) in payables 1,048 (1,896)
Cash generated by operations 20,064 18,264
Tax paid (1,465) (2,617)
Net cash from operating activities 18,599 15,647
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired (14,105) (2,219)
Disposal of subsidiaries - (146)
Proceeds on sale of fixed assets - 15
Purchase of property, plant and equipment (895) (911)
Purchase / capitalisation of intangible assets (7,627) (6,647)
Finance income 80 73
Net cash used in investing activities (22,547) (9,835)
Cash flows from financing activities
Interest paid (1,439) (997)
Loan drawdowns 39,706 2,500
Loan related costs (169) (183)
Loan repayments (30,000) (9,100)
Principal lease payments (936) (927)
Equity dividends paid (2,268) (1,784)
Issue of own shares (185) (133)
Net cash inflows / (outflows) from financing activities 4,709 (10,624)
Net movement in cash and cash equivalents 761 (4,812)
Cash and cash equivalents at the beginning of the year 13,864 18,283
Exchange gains on cash and cash equivalents 199 393
Cash and cash equivalents at the end of the year 14,824 13,864
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 2022 and 31 October 2023 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 2023.
Statutory accounts for the year ended 31 October 2022 have been delivered to
the Registrar of Companies. The statutory accounts for the year ended 31
October 2023, 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 2022 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 October 2023 the Group refinanced with the National Westminster Bank plc,
HSBC Innovation Bank Limited and Santander UK plc. The facilities comprise a
revolving credit facility of £75m and a £45m accordion and are committed
until October 2026. The Group retains significant liquidity with cash and
available committed bank facilities and has strong headroom against financial
covenants.
As part of the preparation of our FY23 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.
Therefore, this supports the going concern assessment for the business.
The Annual Financial Report Announcement was approved by the Board of
Directors on 24 January 2024 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
2023 are set out in the Annual Financial Report 2023.
3 SEGMENTAL ANALYSIS
During the year ended 31 October 2023, the Group was organised into three
operating segments, which are detailed below.
To provide a more targeted focus on the markets that we serve, and to ensure
closer alignment to our customers, effective from 1 November 2022, the Group
have implemented a divisional structure that consolidates Business Units
delivering comparable technical solutions or serving similar markets: Land,
Property & Public Protection, Communities and Assets. Each business unit
is deemed an operating segment.
IFRS 8 Operating Segments requires the disclosure of reported segments in
accordance with internal reports provided to the Group's chief operating
decision maker. The Group considers its Board of Directors to be the chief
operating decision maker and therefore has aligned the segmental disclosures
with the monthly reports provided to the Board of Directors.
· Land, Property & Public Protection (LPPP) - delivering
specialist information management solutions and services to the public sector.
· Assets - delivering engineering document management and control
solutions to asset intensive industry sectors.
· Communities (COMM) - delivering software solutions to clients
with social value running through their core.
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.
With the continued expansion of our Geospatial offering, from 1 November 2023
we have split this out of the LPPP segment and will be reporting it as a
fourth operating segment in FY24.
The segment revenues by geographic location are as follows:
2023 2022
£000 £000
Revenues from external customers
United Kingdom 64,905 58,053
USA 4,926 4,834
Rest of Europe 2,481 2,781
Rest of World 965 516
73,277 66,184
Revenues are attributed to individual countries on the basis of the location
of the customer.
The segment revenues by type are as follows:
2023 2022
£000 £000
Revenues by type
Recurring revenues - LPPP 24,305 21,918
Recurring revenues - Assets 9,692 9,730
Recurring revenues - Communities 9,622 8,898
Recurring revenues 43,619 40,546
Non-recurring revenues - LPPP 19,108 13,155
Non-recurring revenues - Assets 5,153 5,105
Non-recurring revenues - Communities 5,397 7,378
Non-recurring revenues 29,658 25,638
73,277 66,184
Revenue from sale of goods 43,190 41,023
Revenue from rendering of services 30,087 25,161
73,277 66,184
Recurring revenue is income generated from customers on an annual contractual
basis. Recurring revenue amounts to 60% (2022: 61%) of revenue from continued
operations, 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
2023 was £68,198,000 and it is anticipated that 65% of this will be
recognised as revenue in FY24 and 23% in FY25.
The segment results by business unit for the year ended 31 October 2023:
LPPP Assets Communities £000 Total
£000 £000 £000
Revenue 43,413 14,845 15,019 73,277
Earnings before depreciation, amortisation, restructuring, acquisition costs, 13,885 4,199 6,366 24,450
impairment, financing costs and share option costs
Depreciation (574) (191) (192) (957)
Depreciation - right-of-use-assets (394) (153) (132) (679)
Amortisation - software licences and R&D (3,353) (1,218) (1,126) (5,697)
Amortisation - acquired intangibles (2,699) (252) (671) (3,622)
Restructuring costs (142) (192) (44) (378)
Acquisition costs (712) (16) (18) (746)
Share option costs (1,637) (397) (597) (2,631)
Segment operating profit 4,374 1,780 3,586 9,740
Financing costs (396)
Operating profit 9,344
Finance income 219
Finance costs (1,743)
Profit before taxation 7,820
The corporate recharge to the business unit EBITDA is allocated on a head
count basis.
Following the establishment of the new divisional structure from 1 November
2022 as described above, the re-presented segment results by business unit for
the year ended 31 October 2022:
Continuing Operations Discontinued Operations
Total Content
LPPP Assets Communities £000 £000 Total
£000 £000 £000 £000
Revenue 35,073 14,835 16,276 66,184 - 66,184
Earnings before depreciation, amortisation, restructuring, acquisition costs, 13,235 4,450 4,824 22,509 - 22,509
impairment, financing costs and share option costs
Depreciation (457) (172) (2199) (848) - (848)
Depreciation - right-of-use-assets (391) (170) (188) (749) - (749)
Amortisation - software licences and R&D (2,494) (1,529) (1,294) (5,317) - (5,317)
Amortisation - acquired intangibles (2,374) (117) (1,179) (3,670) - (3,670)
Restructuring costs (39) (412) (19) (470) - (470)
Acquisition costs (183) - - (183) - (183)
Share option costs (1,501) (467) (616) (2,584) - (2,584)
Segment operating profit / (loss) 5,796 1,583 1,309 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.
4 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 2023 2022
£000 £000
Profit for the year 5,582 5,611
Basic earnings per share
Weighted average number of shares in issue 449,016,841 443,413,006
Basic earnings per share 1.24p 1.27p
Weighted average number of shares in issue 449,016,841 443,413,006
Add back:
Dilutive share options 6,563,834 8,636,936
Weighted average allotted, called up and fully paid share capital 455,580,675 452,049,942
Diluted earnings per share
Diluted earnings per share 1.23p 1.24p
Adjusted earnings per share 2023 2022
£000 £000
Profit for the year 5,582 5,611
Add back:
Amortisation on acquired intangibles 3,622 3,670
Impairment 168 -
Acquisition costs 746 183
Restructuring costs 378 470
Financing costs 396 30
Share option costs 2,631 2,584
Tax effect (1,606) (1,533)
Adjusted profit for year 11,917 11,015
Weighted average number of shares in issue - basic 449,016,841 443,413,006
Weighted average number of shares in issue - diluted 455,580,675 452,049,942
Adjusted earnings per share 2.65p 2.48p
Adjusted diluted earnings per share 2.62p 2.44p
Total Operations 2023 2022
£000 £000
Profit for the year 5,582 5,044
Basic earnings per share
Weighted average number of shares in issue 449,016,841 443,413,006
Basic earnings per share 1.24p 1.14p
Weighted average number of shares in issue 449,016,841 443,413,006
Add back:
Dilutive share options 6,563,834 8,636,936
Weighted average allotted, called up and fully paid share capital 455,580,675 452,049,942
Diluted earnings per share
Diluted earnings per share 1.23p 1.11p
5 INTANGIBLE ASSETS
Goodwill Customer relation- Trade names Software Develop-ment costs Order backlog Total
Ships
£000 £000 £000 £000 £000 £000 £000
Cost
At 1 November 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
Foreign exchange - - - - (5) (14) (19)
Additions - - - 12 7,616 - 7,628
Additions on acquisition 8,894 7,650 - 1,500 - - 18,044
Impairment - - - - (667) - (667)
Fair value adjustment 22 - - - - - 22
At 31 October 2023 93,264 42,496 11,716 31,042 41,497 319 220,334
Amortisation
At 1 November 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
Foreign exchange - - - - (5) (14) (19)
Amortisation for the year - 1,673 363 1,702 5,413 - 9,151
Impairment - - - - (499) - (499)
At 31 October 2023 31,709 22,804 9,876 21,441 25,400 319 111,549
Carrying amount at 31 October 2023 61,555 19,692 1,840 9,601 16,097 - 108,785
Carrying amount at 31 October 2022 52,639 13,715 2,203 9,791 14,062 - 92,410
Average remaining amortisation period (years)
31 October 2023 n/a 11.8 5.1 5.6 2.9 -
31 October 2022 n/a 9.1 5.2 4.3 3.0 -
During the year, goodwill and intangibles were reviewed for impairment in
accordance with IAS 36, 'Impairment of Assets'. An impairment charge of
£168,000 (2022: £Nil) was processed in the year and is included in the
amortisation line of the statement of comprehensive income.
Fair value adjustments are in relation to the finalisation of acquisition
accounting in respect of LandHawk Software Services Limited.
Impairment test for goodwill
For this review, goodwill was allocated to the Group's divisional business
units on the basis of the Group's operations which represent the Group's
operating segments 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 operating segment is as follows:
2023 2022
Operating segments £000 £000
Land, Property & Public Protection (LPPP) 39,091 30,175
Assets 14,196 14,196
Communities 8,268 8,268
61,555 52,639
The recoverable amount of goodwill in each operating segment 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 three financial years. The key assumptions used in the
financial budgets relate to revenue and Adjusted 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 forecasts (as described above) 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 2023, the Weighted Average Cost of Capital for each operating segment
has been used as an appropriate discount rate to apply to cash flows. The same
basis was used in the year to 31 October 2022.
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
operating segment:
Operating segments Discount rate Annualised EBITDA growth rate over three years Long term growth rate Discount rate Growth rate prior year
current year current year prior year
LPPP 16.1% 15.7% 3.0% 15.9% 2.2%
Assets 16.7% 6.5% 3.0% 16.9% 2.2%
Communities 16.1% 3.3% 3.0% 15.9% 2.2%
Individual Weighted Average Costs of Capital were calculated for each
operating segment and adjusted for the market's assessment of the risks
attaching to each operating segment's cash flows. The Weighted Average Cost of
Capital is recalculated at each period end.
Management considered the carrying value of goodwill within the Group in
comparison to the future budgets and have processed an impairment charge of
£Nil within the year in relation to the Group's goodwill (2022: £Nil).
The Group has conducted sensitivity analysis on the impairment test of each
operating segments 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 operating
segment exceeding the recoverable amount.
Sensitivities have been conducted on cash flow forecasts for all operating
segments EBITDA by 10%. Management are satisfied that this change would not
lead to the carrying amount of each operating segment exceeding the
recoverable amount. Sensitivities have also been conducted on cash flow
forecasts for all operating segments reducing the growth rate to 0%.
Management are satisfied that this change would not lead to the carrying
amount of each operating segment exceeding the recoverable amount.
Management have not identified any individual assumption within the estimate
where a reasonably possibly change in estimate could result in all goodwill
headroom being eroded.
Management have further considered the operating segments for which prior
period impairments were recorded to reduce the value-in-use of those operating
segments to their recoverable amount, and how such carrying values are subject
to the current year sensitivities noted above.
6 ACQUISITIONS
Emapsite
On 18 August 2023, the Group acquired the entire share capital of Emapsite.com
Limited.
Emapsite is a successful provider of Geospatial data to the UK market for
customers associated with land and property across a wide range of vertical
industries including energy, infrastructure, environmental,
telecommunications, and construction sectors. Emapsite will add significant
scale and data capabilities to the existing Idox Geospatial offering.
Goodwill arising on the acquisition of Emapsite has been capitalised and
consists largely of the value of the synergies and economies of scale expected
from combining the operations of Emapsite with Idox. None of the goodwill
recognised is expected to be deductible for income tax purposes. The purchase
of Emapsite has been accounted for using the acquisition method of accounting.
Book value Fair value
£000 £000
Property, plant and equipment 31 31
Trade receivables 1,282 1,282
Other receivables 237 237
Cash at bank 3,329 3,329
Total Assets 4,879 4,879
Trade payables (787) (787)
Other liabilities (2,098) (3,829)
Contract liabilities (324) (324)
Social security and other taxes (309) (269)
Deferred tax liability (9) (2,095)
Total Liabilities (3,527) (7,304)
Net Assets (2,425)
Goodwill arising on acquisition 8,894
Purchased customer relationships capitalised 7,650
Purchased software capitalised 1,500
Total consideration 15,619
Satisfied by:
Cash to vendor 14,750
Deferred consideration 869
15,619
The revenue included in the consolidated statement of comprehensive income
since 18 August 2023 contributed by Emapsite was £2.7m. Emapsite also made a
profit after tax of £0.2m for the same period. If Emapsite had been included
from 1 November 2022, it would have contributed £13.0m to Group revenue and a
profit after tax of £1.1m.
Acquisition costs of £264,000 have been written off in the consolidated
statement of comprehensive income.
LandHawk
During the year there has been further fair value adjustment in respect of the
acquisition of LandHawk Software Services Limited. The adjustment totalled
£22,000.
Adjustments were processed to ensure pre-acquisition related costs were
recognised in the correct period. This resulted in a decrease of £22,000 in
respect of working capital movements.
Acquisition of subsidiaries net of cash acquired
£000
Acquisition of subsidiaries net of cash acquired per cashflow statement (14,105)
Deferred consideration payment made in relation to exeGesIS 1,650
Deferred consideration payment made in relation to Aligned Assets 1,000
LandHawk consideration completion adjustment 34
Cash acquired as part of the Emapsite acquisition (3,329)
(14,750)
Cash to vendor per Emapsite acquisition note 14,750
7 POST BALANCE SHEET EVENTS
There have been no post balance sheet events which had a material impact on
the Group.
8 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 2023.
9 ALTERNATIVE PERFORMANCE MEASURES
Following the issuance of the Guidelines on Alternative Performance Measures
(APMs) by the European Securities and Markets Authority (ESMA) in June 2015,
the Group has included this section in its Annual Report and Accounts with the
aim of providing transparency and clarity on the measures adopted internally
to assess performance. Throughout this report, the Group has presented
financial performance measures which are considered most relevant to Idox and
are used to manage the Group's performance. These financial performance
measures are chosen to provide a balanced view of the Group's operations and
are considered useful to investors as these measures provide relevant
information on the Group's past or future performance, position, or cash
flows. The APMs, which are not defined or specified under International
Financial Reporting Standards, adopted by the Group are also commonly used in
the sectors it operates in and therefore serve as a useful aid for investors
to compare Idox's performance to its peers. The Board believes that disclosing
these performance measures enhances investors' ability to evaluate and assess
the underlying financial performance of the Group's operations and the related
key business drivers. These financial performance measures are also aligned to
measures used internally to assess business performance in the Group's
budgeting process and when determining compensation. They are also 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.
We believe that these measures provide a user of the accounts with important
additional information. The following table reconciles these APMs to statutory
equivalents for continuing operations:
2023 2022
£000 £000
Adjusted EBITDA:
Profit before taxation 7,820 6,602
Depreciation and Amortisation 10,955 10,584
Restructuring costs 378 470
Acquisition costs 746 183
Financing costs 396 30
Share option costs 2,631 2,584
Net finance costs 1,524 2,056
Adjusted EBITDA 24,450 22,509
Free cashflow:
Net cashflow from operating activities after taxation 18,599 15,647
Capex (8,522) (7,558)
Lease payments (936) (927)
Free cashflow 9,141 7,162
Net debt:
Cash (14,824) (13,864)
Bank borrowings 18,291 9,201
Bonds in issue 11,207 11,325
Net Debt 14,674 6,662
Adjusted profit for the year and adjusted earnings per share:
Profit for the year 5,582 5,611
Add back:
Amortisation on acquired intangibles 3,622 3,670
Impairment 168 -
Acquisition costs 746 183
Restructuring costs 378 470
Financing costs 396 30
Share option costs 2,631 2,584
Tax effect (1,606) (1,533)
Adjusted profit for year 11,917 11,015
Weighted average number of shares in issue - basic 449,016,841 443,413,006
Weighted average number of shares in issue - diluted 455,580,675 452,049,942
Adjusted earnings per share 2.65p 2.48p
Adjusted diluted earnings per share 2.62p 2.44p
The Group adjusts for certain non-underlying items which the Board believes
assists in understanding the performance achieved by the Group. These are
non-underlying items as they do not relate to the underlying performance of
the Group. Profit before taxation is adjusted for depreciation, amortisation,
restructuring costs, acquisition costs, financing costs, share option costs
and net finance costs to calculate a figure for EBITDA which is commonly
quoted by our peer group and allows users to compare our performance with
those of our peers. This also provides the users of the accounts with a view
of the underlying performance of the Group which is comparable year on year.
Depreciation and amortisation are omitted as they relate to assets acquired by
the Group which may be subject to differing treatment within the peer group
and so this allows meaningful comparisons to be made.
Amortisation on acquired intangibles omitted in order to improve the
comparability between acquired and organic operations as the latter does not
recognise internally generated intangible assets. Adjusting for amortisation
provides a more consistent basis for comparison between the two.
Restructuring costs, acquisition costs, financing costs and net finance costs
are omitted as they are considered to be one off in nature or do not represent
the underlying trade of the Group. The items within these categories are
assessed on a regular basis to ensure that they do not contain items which
would be deemed to represent the underlying trade of the business.
Share option costs are excluded as they do not represent the underlying trade
of the business and fluctuate subject to external market conditions and number
of shares. This would distort year-on-year comparison of the figures.
Profit after taxation is adjusted for amortisation from acquired intangibles,
restructuring costs, acquisition costs, financing costs and share option
costs, as well as considering the tax impact of these items. To exclude the
items without excluding the tax impact would not give the complete picture.
This enables the user of the accounts to compare the core operational
performance of the Group. Adjusted earnings per share takes into account all
of the factors above and provides users of the Annual Report and Accounts
information on the performance of the business that management is more
directly able to influence and on a comparable basis for year to year. Readers
of the Annual Report and Accounts are encouraged to review the financial
statements in their entirety.
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