REG - Made Tech Group PLC - Audited Final Results 2024
30/09/2024 07:00
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RNS Number : 1248G Made Tech Group PLC 30 September 2024
30 September 2024
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
MADE TECH GROUP PLC
("Made Tech" or the "Group")
FINAL RESULTS 2024
Substantial increase in Adjusted EBITDA with improving outlook
Made Tech Group plc, a leading provider of digital, data, and technology
services to the UK public sector, is pleased to announce its audited final
results for the year ended 31 May 2024 (the "Period").
Financial highlights
FY24 FY23 Change
Revenue £38.6m £40.2m -£1.6m
Gross profit £14.0m £14.4m -£0.4m
Gross profit margin 36.3% 35.8% +50bps
Adjusted EBITDA(1) £2.4m £1.5m +£0.9m
Adjusted EBITDA margin 6.2% 3.8% +240bps
Statutory loss before tax £(3.0)m £(1.5)m -£1.5m
Adjusted profit before tax(2) £1.4m £1.1m +£0.3m
Sales Bookings(3) £36.0m £69.9m -£33.9m
Contracted Backlog(4) £65.6m £67.9m -£2.3m
Net cash £7.6m £8.5m -£0.9m
(1) Adjusted EBITDA has been adjusted for the exclusion of depreciation,
amortisation, impairments, exceptional items and share based payment charge
(2) Adjusted profit before tax means profit before tax before impairments, share
based payment charge and exceptional items
(3) Sales Bookings represent the total value of sales contracts awarded in the
Period, to be delivered in future financial periods
(4) Contracted Backlog is the value of contracted revenue that has yet to be
recognised
Strategic and Operational highlights
● Substantial improvement in Adjusted EBITDA, up 56%, reflecting both an
increase in gross margin, driven by increased billable utilisation, and lower
costs as a result of targeted reductions in headcount in certain support
functions
● Solid Contracted Backlog underpinning revenue expectations for FY25
● Ongoing investment in senior leadership, commercial team, and client leads,
enabling the business to better support its clients and drive growth
● Strong balance sheet with substantial cash and no debt
Post year end highlights and outlook
● Strong start to FY25 with sales bookings of more than £27.0m in FY25
year-to-date, including the award of a £13.2m, 4 year contract, from
Department for Education
● New government emphasising the significant role technology will play in
delivering its priorities supports confidence for long term growth
● Net cash at 31 August 2024 increased to £8.6m (31 May 2024: £7.6m); the
Board anticipates that the Group will generate positive free cash flow in FY25
● Robust revenue and Adjusted EBITDA performance in Q1 FY25; the Board looks
forward to updating the market on progress over the coming months
Rory MacDonald, CEO, said:
"We are excited about both our near-term and long-term prospects. The timing
of the general election has been a positive surprise, removing significant
uncertainty for our clients and providing a clearer set of priorities.
The strong sales bookings achieved in the first four months of FY25 is
encouraging and we expect this robust performance to continue throughout the
financial year. This optimism is reinforced by our recent contract win with
the Department for Education, which highlights our ongoing progress and our
ability to build valuable and long-term client relationships.
While we remain mindful of the broader economic challenges and upcoming Autumn
budget, the steps we have taken to strengthen the organisation and prepare for
the future, provide us with great confidence that we are well-positioned to
seize emerging opportunities and drive continued success in the coming years."
Enquiries:
Made Tech via Rawlings Financial
Rory MacDonald, Chief Executive Officer
Neil Elton, Chief Financial Officer
Singer Capital Markets (Nominated Adviser & Broker) Tel: +44 (0) 20 7496 3000
Jen Boorer/ Asha Chotai
Rawlings Financial
Cat Valentine Tel: +44 (0) 7715 769078
madetech@rfpr.co.uk (mailto:madetech@rfpr.co.uk)
About Made Tech
Made Tech is a provider of digital, data and technology services, which enable
central government, healthcare, local government organisations and other
regulated industries to digitally transform.
Made Tech's purpose is to "positively impact the future of society by
improving public services technology". To achieve this the company has four
key strategic missions: Modernise legacy technology and working practices;
Accelerate digital service and technology delivery; Drive better decisions
through data and automation; and Enable technology and delivery skills to
build better systems.
The Group operates from four locations across the UK - London, Manchester,
Bristol, and Swansea.
More information is available at https://investors.madetech.com/
(https://investors.madetech.com/) .
CHAIR'S REPORT
I am pleased to present Made Tech's audited annual results for the year ended
31 May 2024.
Summary of the year
The government procurement market for digital services in FY24 slowed in the
run up to the UK general election and as a result sales bookings of £36.0m
(FY23: £69.9m) were 48% down and revenue of £38.6m (FY23: £40.2m) was 4.0%
down on the prior year but remained in line with market expectations.
However, it is encouraging that the Contracted Backlog at the end of the year
was £65.6m, only 3% down on the prior year (FY23: £67.9m).
The Group has made excellent progress during the year increasing productivity
within the business. As a result, gross margins increased from 35.8% in FY23
to 36.3% in FY24, and Adjusted EBITDA increased from £1.5m (3.8%) to £2.4m
(6.2%) over the same period.
Strategic delivery
After particularly strong sales growth over the past few years, sales activity
has been more subdued during FY24, primarily due to the uncertainty created in
the run up the general election and budgetary pressures within government.
The board is confident, however, about the long term growth prospects in the
public digital services market and Made Tech's ability to deliver on those
opportunities.
In FY24 the business has focused on improving profitability through increased
productivity, driven primarily through improved capacity management, reporting
and processes. As we look to improve our quality of earnings by
diversifying our customer base, increasing the proportion of revenue generated
from longer term, fixed price and recurring projects, we have also continued
to invest in developing our capability propositions and have seen particular
success in growing our Data & AI and Managed Services practices.
We continue to put the needs of our clients at the heart of what we do,
working as a strategic partner to deliver effective and meaningful results at
pace. We focus on delivering value for money for our clients; independent
customer feedback highlights how our clients value our proactive and
independent contribution to solving their issues. In short, we care about
how we work with our clients and the outcomes we deliver.
We have invested in senior management and new commercial leads to help open up
new markets and deepen our relationships with our clients. Our business is
structured around market verticals such as Public Safety & National
Security, Healthcare & Life Sciences, and Energy, Utilities &
Environment, which means that our teams can bring market expertise and
insights to their clients and ensure that Made Tech's extensive capabilities
are appropriately deployed. We believe that our market focus aligns well
with the stated priorities of the UK government and other public sector
bodies.
In the Local Government & Housing sector, Made Tech is focused on
delivering scalable SaaS solutions to address some of the issues faced by our
clients in this fragmented market. Owing to the longer sales cycles and time
to market than originally anticipated the Company has written down the value
of the investment it has made to date in its Housing Products. Nevertheless,
we continue to see opportunities in this market and are actively pursuing
the commercialisation of our existing products and looking to further develop
our technology platform offerings.
Our people are fundamental to the success and sustainability of Made Tech. We
rely on their skills, motivation and commitment to deliver services and
solutions to our clients. We continue to recruit talented individuals across
the UK combining a regional hub-based hybrid working strategy, taking account
of the needs of our people for flexible working patterns, whilst at the same
time optimising the quality of service we are able to provide to our clients
through an on-site presence.
Many of our staff who were with Made Tech at the time of our IPO in 2021 have
been incentivised through the granting of restricted stock options. From
FY25 we are looking to launch a SAYE scheme for all eligible employees, to
enable them to participate in the equity growth ambition of the Company.
Our financial position remains strong. Made Tech is debt free, unlike many
technology businesses, and our cash balance is robust at £7.6m at the end of
FY24, providing more than sufficient funds to deliver our plans for future
organic growth. This financial strength gives us the flexibility to take
advantage of opportunities as they arise. In FY25, alongside a focus on
growing our client base and revenues, we will further look to improve
productivity and profitability and generate positive free cash flow.
A responsible business
Made Tech's mission is to help deliver a future where public services are
modern, secure and easy to adapt; enabled through transformed digital
services. In doing so, our aim is to improve the lives of millions of
citizens by helping our clients deliver on their plans. Alongside the needs
of our investors and employees, the requirements of our clients and the
communities we serve are paramount in setting our strategy.
We are committed to continuing to develop our environmental, social and
governance priorities embedded within our overall strategy and as a
fundamental part of what it means to be Made Tech. We are committed to
sourcing, designing and offering services and products which support
social responsibility and environmental sustainability.
We have an established ESG Committee, headed by Tim Bardell (Chief Delivery
& Transformation Officer), and comprising enthusiastic volunteers from all
across our group, voted for by their peers, to advise and assist management in
incorporating social value initiatives into the overall strategic delivery of
the Group.
We are proud to have achieved carbon neutral status for the second year
running and we are busy implementing initiatives aimed at reducing our carbon
footprint. We have set the ambitious target of transforming our operations
to be Carbon Net Zero by 2030 utilising all practical measures. We will also
work with our clients to help them reach their own social value targets. We
recognise the importance of creating a fairer and more equitable society. We
are proud that our gender, ethnicity, and other diversity measures remain
materially better than the industry average for the technology sector.
Further details are provided in the Social Value report in the FY24 Annual
Report.
The board
In February 2024, we were pleased to welcome Neil Elton to the board as Chief
Financial Officer (CFO), replacing Deborah Lovegrove. Neil brings extensive
experience of managing professional services and software businesses and of
scaling companies through organic growth, M&A and international
expansion. He was previously CFO of Learning Technologies Group plc and
Science Group plc, both successful high growth AIM listed technology
companies.
Deborah stepped down from the board at the end of January, having joined the
Company at the time of its IPO. The board thanks Deborah for her
contribution to the Group over the previous two and a half years and wishes
her every success in her next endeavours.
The board notes the recommendations of the Hampton-Alexander and Parker
reviews in relation to increasing board and senior management gender and
ethnic diversity, and it takes these into account when making appointments.
We have six board members of which three are Non-Executive Directors. We
note that Made Tech achieves the voluntary target set for FTSE100 and FTSE 250
boards of at least 33% of board positions being represented by women.
As a board, we take our governance responsibilities very seriously and believe
that these allow the Group to pursue its strategy with pace and reduced
risk. The approach to our wide range of responsibilities is set out in the
Corporate governance report in the FY24 Annual Report. In line with best
practice all directors will put themselves up for re-election at the
forthcoming Annual General Meeting.
Current trading and outlook
The business saw minimal operational impact during the period in the run-up to
the general election. The new government has emphasised the significant role
technology will play in delivering their priorities and we expect the Group to
be well-positioned to capitalise on these opportunities. We anticipate this
will lead to increased trading momentum for the Group over the coming years.
We have seen a strong sales performance in the first four months of the new
financial year with sales bookings of more than £27.0m. The Group has
traded in line with management's expectations in the first quarter of FY25
delivering robust revenue and Adjusted EBITDA performance. Cash at the end
of August has increased to £8.6m.
In summary, we feel we are well placed to continue Made Tech's progress as an
increasingly important provider of technology services and products to the UK
public sector and we look forward to delivering long-term returns and value
for all our stakeholders.
Joanne Lake
Non-Executive Chair
CHIEF EXECUTIVE'S REVIEW
FY24 has brought both challenges and significant opportunities. While the
digital transformation market encountered headwinds from economic pressures
including inflation, rising interest rates, and slower growth, these pressures
have only reinforced the urgent need for smarter, more efficient public
services. Digital transformation remains the key driver of that efficiency,
and we are well-positioned to support the public sector as it evolves to meet
these demands.
Despite these difficulties, and after five years of rapid growth, during which
we achieved a CAGR of 88% between FY19 and FY23, we have focused on
strengthening our core proposition and preparing the business for the next
wave of growth. This period has allowed us to transition key people,
processes, and organisational structures; the themes of stabilisation and
transition will be evident throughout this update.
Reflecting on the current landscape, it's reminiscent of FY19-a year when Made
Tech started a significant growth trajectory. Much like then, we now face both
challenges and tremendous opportunities within a renewed political landscape.
Growth is not always linear, but we are confident that the strategic choices
we are making today will position us to continue delivering long-term value
for all.
Robust performance in challenging operating environment
Given the challenging operating environment Made Tech delivered satisfactory
financial results for the year. We achieved revenue of approximately £38.6m,
in line with consensus expectations. Our adjusted EBITDA was £2.4m,
slightly surpassing market expectations and representing a significant
improvement from the previous year, with the margin increasing from 3.8% to
6.2%.
Our net cash position remains strong at £7.6m, compared to £8.5m in FY23,
and is materially ahead of expectations. This reflects our effective cash
management and operational efficiency.
New sales bookings totalled £36.0m, down from £69.9m in FY23, due to the
challenging procurement environment. Despite this, our contracted backlog
remains solid at around £65.6m, compared to £67.9m in the previous year,
demonstrating our continued ability to secure and maintain valuable contracts.
Continuing our long-term client relationships
Throughout the year, client retention has been robust, with all key customers
since our IPO continuing their active engagement with us. This ongoing
partnership is a testament to the trust and confidence our clients place in
our services, and we are immensely grateful for their continued support.
The size of contracts secured during this period varied significantly. We won
a major contract valued at over £15m, while the remaining contracts were
smaller, each under £5m. This mix of contract sizes reflects both the
diversity of our offerings and the broad range of clients we serve.
In terms of revenue distribution, Central Government accounted for 73% (FY23:
72%), Health contributed 16% (FY23: 12%), and Local Government made up 11%
(FY23: 16%) of our total revenue. This spread across sectors underscores our
ability to deliver value across different parts of the public sector.
We also conducted a Customer Satisfaction (CSAT) survey during this period,
achieving a score of 81%. We are pleased with this result as it reflects our
commitment to maintaining high standards of service and effectively meeting
our clients' needs.
Refresh of our strategic plan
During the year, we undertook a significant strategic review, aiming to align
our long-term objectives with market opportunities. This process, conducted in
close collaboration with our Board and external advisors, has resulted in a
comprehensive long-term strategy designed to guide our growth over the coming
years.
Our strategy is organised into three stages, each with its own focus and
goals. The first stage addresses our immediate priorities, setting the
foundation for the next phases. The second stage will build on this
foundation, driving substantial mid-term growth, while the third stage is
geared towards strengthening our competitive position and ensuring sustained
success over the longer term.
We expect to host a capital markets event next year to provide deeper insights
into our strategic plan, detailing how we intend to achieve our objectives and
drive future growth.
Developing our service lines
Over the past year, our service line focus has shifted from investment to
embedding the insights gained from previous initiatives.
Our Data & AI services remain a central focus, driven by sustained high
demand. We have undertaken several key data projects, reflecting the growing
interest in AI among our clients.
Our Managed Services offerings are now showing promising results, following
investments in previous years. We have secured significant managed service
contracts and developed a strong pipeline of opportunities. This service line
continues to present an important opportunity for long-term, stable revenue
growth.
Restructuring our sales organisation, to power the next wave of growth
Over the past 12 months, we have implemented significant changes to our sales
organisation, all aimed at positioning the business for long-term success. A
cornerstone of our strategy has been enhancing our access to senior client
stakeholders. By building stronger relationships with key decision-makers, we
are now better positioned to understand and respond to their complex needs,
ensuring more impactful and strategic engagements.
We have also made pivotal appointments of senior sales leaders across various
industry verticals, including Public Safety & National Security, Energy,
Utilities and Environment, and Space & Defence. These leaders bring a
wealth of expertise and industry-specific knowledge, enabling us to better
serve our clients and drive growth in these critical areas.
Furthermore, we have comprehensively rebuilt our bid team, incorporating
seasoned professionals with extensive experience in managing large-scale bids.
This restructuring enhances our capability to pursue and secure high-value
contracts, reinforcing our competitive edge in the market.
Together, these changes are designed to optimise our sales operations, improve
our market positioning, and drive sustainable growth for the company.
Challenges building our software division
Building our software division has taken longer than we initially anticipated,
reflecting the complexity and scale of the undertaking. Despite these hurdles,
our commitment to developing a business that provides both software and
services remains strong and we see software being a crucial component of our
long-term strategy.
Over the past year, we have moved from the development phase to the
commercialisation phase. This shift has proven more challenging than expected,
largely due to the prevailing "change fatigue" in the market, which has
extended our sales cycles. However, we continue to see strong interest in our
products, underscoring their potential and value.
To address these challenges and drive our software business forward, we have
made changes to our software division structure. Chris Blackburn (COO) has
been tasked with leading these efforts as we head into FY25. His experience
and insights are expected to be instrumental in refining our product strategy
and execution.
Additionally, we have appointed an external board advisor whose expertise will
complement our internal efforts and provide valuable perspectives as we
continue to build and scale our software division.
Investing in our people
Our people are our greatest asset, and we remain committed to their continuous
development. Over the past year, we invested substantial time in technical
skill development across the organisation. Recognising the importance of
leadership at all levels, we also introduced a leadership development
programme aimed at equipping current and future leaders with the necessary
skills to drive the company forward.
We have seen healthy growth and progression in recruitment and internal
mobility. We promoted 54 individuals within the organisation, recognising
their contributions and ensuring they are well-prepared for their new roles.
Additionally, we welcomed 61 new hires to our team, bringing fresh
perspectives and expertise. Our staff attrition rate substantially improved
to 19% in FY24 (FY23: 30%), and we are targeting a mid-teen attrition rate
over the medium-term aided by enhanced employee engagement and development
initiatives.
To further strengthen our engagement efforts, we successfully launched a
People Forum, comprising employee representatives from various parts of the
business. This forum is designed to foster open dialogue, enabling us to
better understand and address the needs and concerns of our workforce. Through
this initiative, we aim to create a more inclusive and responsive
organisational culture.
Strengthening the board and executive, to drive our ambitious plans
To drive our long-term strategy effectively, we have made several changes to
our senior leadership team, ensuring we have the right individuals in key
roles. These appointments and changes are crucial as we position ourselves for
future growth and navigate a dynamic market environment.
A key addition to our leadership is Neil Elton, who joined us as Chief
Financial Officer in January. Neil brings substantial public market
experience, which will be instrumental in refining our financial strategy and
supporting our ambitious growth plans. Additionally, Wayne Searle, who joined
us in June 2023, is now well-established within the business. His integration
into our team has already proven beneficial, and his ongoing contributions
will be pivotal as we continue to evolve and expand.
In parallel, we have been building the Made Tech Advisory Group to bring in
expertise that aligns with our strategic priorities. We have made significant
appointments, including leaders with extensive experience in the water
industry, as well as a former Director General who has held several senior
roles within central government. These additions will provide us with critical
industry insights and strategic guidance, enabling us to better navigate the
complexities of our operating environment.
An exciting near-term and long-term outlook
We are excited about both our near-term and long-term prospects. The timing of
the general election has been a positive surprise, removing significant
uncertainty for our clients and providing a clearer set of priorities.
The strong sales bookings achieved in the first four months of FY25 is
encouraging and we expect this robust performance to continue throughout the
fiscal year. This optimism is reinforced by our recent contract win with the
Department for Education, which highlights our ongoing progress and our
ability to build valuable and long-term client relationships.
While we remain mindful of the broader economic challenges and upcoming Autumn
budget, the steps we have taken to strengthen the organisation and prepare for
the future, provide us with great confidence that we are well-positioned to
seize emerging opportunities and drive continued success in the coming years.
Rory MacDonald
Founder & Chief Executive Officer
FINANCIAL REVIEW
Revenue
Group revenue for the year ended 31 May 2024 was £38.6m representing a
reduction of 4% on the prior year (FY23: £40.2m). The public sector
procurement market for digital services was subdued during the year, primarily
as a result of uncertainty created by the upcoming UK general election and
budget pressures within government departments.
Despite this uncertainty, sales bookings totalled £36.0m (FY23: £69.9m) and
at the year-end the Group had a Contracted Backlog of £65.6m, being only 3%
down on the previous year (FY23: £67.9m).
The Group continued to see growth amongst its Central government customers
offset by declines in local government. Services accounted for almost all
revenue with the balance represented by our early-stage SaaS product sales.
In line with our strategic objective of diversifying the range of services
that we offer to our clients, we continued to invest in capabilities such as
Data & AI and Managed Services, where we saw substantial year-on-year
growth.
Gross profit
Despite the reduction in revenue, a competitive procurement market and
inflationary cost pressures, the Group successfully increased gross margins
for the year from 35.8% in FY23 to 36.3% in FY24. This was accomplished in
large part through improved forecasting and capacity management. Total
headcount reduced from 434 at 31 May 2023 to 364 at 31 May 2024, helping to
further optimise staff utilisation on client projects. We anticipate further
productivity gains during FY25.
Adjusted EBITDA
Adjusted EBITDA for FY24 was £2.4m (FY23: £1.5m), an increase of 56%
year-on-year. The Adjusted EBITDA margin also increased to 6.2%, up from
3.8% in FY23. This improvement in part reflects the increase in gross margin
as well as lower costs in certain support functions as a result of targeted
reductions in headcount. Alongside these savings, the business has continued
to invest in its client leads, enabling Made Tech to better support its
clients and drive growth.
Operating loss
The operating loss for the year of £3.2m (FY23: £1.5m operating loss) is
stated after a £0.1m share-based payment charge (FY23: £2.1m), depreciation
of £0.4m (FY23: £0.4m), amortisation of £0.8m (FY23: £nil) and an
impairment charge of £4.3m (FY23: £nil). There were no other exceptional
charges in the year (FY23: £0.6m).
At the beginning of the year, the Company commenced the commercialisation of a
number of its product and service offerings that had been in development over
the previous years. As a result, the Company started to amortise a number of
these intangible assets. The amortisation charge in the year was £0.8m
(FY23: nil).
In the first half of the year, management impaired the Company's investment in
its apprenticeship Academy, a program developed alongside government
departments including the HMRC. Although the IP will continue to be used by
the business, the Board does not now view this as being a core
revenue-generating offering.
A further review was undertaken at the end of the financial year, as a result
of which management decided to impair the Company's investment in its SaaS
product portfolio. Although Made Tech continues to win new local government
clients for its housing repairs SaaS solution, the sales cycle has proven to
be more extended than originally anticipated. As announced at the time of
the Interim Results, the Company will continue to pursue the commercial
roll-out and refinement of these SaaS products. The total impairment charge
for the year was £4.3m (FY23: nil). The Company's investment in its service
capabilities remains unaffected; the year-end carrying value of the Company's
Capability IP is £1.1m (FY23: £2.5m).
The share-based payment charge for the period under IFRS 2 was £0.1m (FY23:
£2.1m). This charge related to awards made under the Long Term Incentive
Plan ("LTIP") and the Restricted Share Plan ("RSP"). The year-on-year
reduction is primarily as a result of the CEO and COO waiving their LTIP
awards and other options that have lapsed. It is anticipated that the
share-based payment charge will increase in FY25 as new performance based
LTIPs and an all-employee Sharesave scheme are launched.
Taxation
The total taxation credit was £543,214 (FY23: £72,000 charge), giving rise
to an effective tax charge of 18% (FY23: 5%). The charge is lower than the UK
standard rate of taxation due to the use of tax losses brought forward. In
future years, we would expect the Group's effective rate of tax to move closer
to the UK corporation tax rate.
Basic earnings per share
The statutory basic loss per share was 1.64p (FY23: loss of 1.07p per
share). Adjusted diluted EPS (see note 9) was 0.92p, 171% up on the prior
year (FY23: 0.34p) primarily as a result of the increase in Group EBITDA.
Cash flow
Cash at the year end was £7.6m (FY23: £8.5m). Net operating cash inflows
in the year were £0.8m (FY23: £0.5m outflow). Investment in intangibles
was reduced substantially from £3.1m in FY23 to £1.3m, as the Company moved
from development to commercialisation of its SaaS technology platform
products. The Company also invested £0.3m (FY23: nil) in an Employee
Benefit Trust ('EBT') for the settlement of future vested share options. As
a result, the EBT holds 1.4% of the issued share capital of the Company.
The Board anticipates that during FY25 the Group will generate positive free
cash flow.
Capital allocation, funding priorities and dividend
The Board remains committed to a capital allocation policy that prioritises
investment in the business to drive growth by either investing in its own IP
or through targeted acquisitions. The Board believes that the opportunities
ahead of us are significant and sees the government's increasing spend in
digital as a long-term trend.
The Group's current cash reserves provide sufficient capital to fund planned
product development and working capital as the business continues to grow.
As at 31 August 2024 the Group cash position had increased to £8.6m (FY24:
£7.6m). The Company has no debt. The Board will consider using debt
financing as appropriate to finance inorganic growth opportunities on a
prudent and sustainable basis.
The Board does not anticipate paying a dividend in the near term as it
prioritises its strategy for growth, but will keep this under review in the
future.
Balance Sheet
The Group has a strong balance sheet with net assets of £12.5m (FY23:
£15.2m) underpinned by £7.6m of cash at the year-end. Trade debtors of
£4.4m (FY23: £4.3m) are held primarily with government clients. Debtor
days increased from 39 to 42 during the year as we followed up on older
outstanding debts. Trade and other payables reduced from £4.7m in FY23 to
£3.1m at the end of FY24.
Neil Elton
Chief Financial Officer
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
Note FY24 FY23
£'000 £'000
Revenue 38,568 40,195
Cost of sales (24,556) (25,802)
Gross profit 14,012 14,393
Administrative expenses (11,688) (12,931)
Share-based payments 15 (80) (2,068)
Depreciation/amortisation 10/11 (1,212) (417)
Impairment 10 (4,315) -
Exceptional items 7 - (574)
Other income 52 59
Operating loss (3,231) (1,538)
Net Interest 6 234 11
Loss before tax (2,997) (1,527)
Taxation credit/(expense) 8 544 (72)
Loss for the period (2,453) (1,599)
Total comprehensive loss attributable to the owners of the parent (2,453) (1,599)
Loss per share:
Loss per ordinary share 9 (1.64p) (1.07p)
Diluted loss per ordinary share 9 (1.64p) (1.07p)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note FY24 FY23
£'000 £'000
Assets
Non-current assets
Tangible assets 11 203 499
Intangible assets 10 1,120 5,013
Total non-current assets 1,323 5,512
Current assets
Trade and other receivables 6,662 6,193
Cash and cash equivalents 7,648 8,474
Total current assets 14,310 14,667
Total assets 15,633 20,179
Equity and liabilities
Equity
Share capital 75 75
Share premium 13,421 13,421
Share-based payment reserve 4,129 4,398
Capital redemption reserve 12 12
Retained direct (5,148) (2,695)
12,489 15,211
Non-current Liabilities
Deferred tax liability 14 50 92
Total non-current liabilities 50 92
Current liabilities
Trade and other receivables 3,094 4,736
Lease liabilities 12 - 140
Total current liabilities 3,094 4,876
Total liabilities 3,144 4,968
Total equity and liabilities 15,633 20,179
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Share-based payment reserve Deferred share Retained earnings Total equity/
£'000 £'000 £'000 reserve £'000 (deficit)
£'000 Capital redemption reserve £'000
£'000
Balance at 1 June 2022 74 13,421 2,376 12 - (1,096) 14,787
Loss for the period - - - - - (1,599) (1,599)
Transactions with equity owners:
Issue of shares 1 - - - - - 1
Cancellation of deferred shares - - - (12) 12 - -
Share-based payment reserve - - 2,022 - - - 2,022
Total transactions with equity owners 1 - 2,022 (12) 12 - 2,023
Balance at 31 May 2023 75 13,421 4,398 - 12 (2,695) 15,211
Loss for the period - - - - - (2,453) (2,453)
Transactions with equity owners:
Share-based payment reserve - - 80 - - - 80
Share-based reserve - purchase of shares - - (349) - - - (349)
Total transactions with equity owners - - (269) - - - (269)
Balance at 31 May 2024 75 13,421 4,129 - 12 (5,148) 12,489
CONSOLIDATED CASH FLOW STATEMENT
Note FY24 FY23
£'000 £'000
Loss for the period (2,453) (1,599)
Adjustments for:
Tax charge 8 (42) 72
Net finance credit in the income statement 6 (234) (11)
Loss on disposal of property, plant and equipment 8 9
Depreciation of property, plant and equipment and amortisation of intangible 10/11 1,212 417
assets
Impairment 4,315 -
Share-based payment 15 80 2,068
Cash flows from operating activities before changes in working capital 2,886 956
Increase in trade and other receivables (469) (128)
Decrease in trade and other payables (1,639) (1,349)
Net cash flows used by operating activities 778 (521)
Cash flows from investing activities
Purchase of property, plant and equipment 11 (89) (60)
Development of intangibles 10 (1,257) (3,109)
Interest and other fees received 6 248 25
Net cash flows used by investing activities (1,098) (3,144)
Cash flows from financing activities
Purchase of equity shares (349) -
Interest and other fees paid (12) (4)
Repayment of lease liability (143) (180)
Interest paid on lease liability (2) (10)
Net cash flows used by financing activities (506) (194)
Net increase in cash and cash equivalents (826) (3,859)
Cash and cash equivalents at the start of the period 8,474 12,333
Cash and cash equivalents at the end of the period 7,648 8,474
NOTES TO THE FINANCIAL STATEMENTS
1. Company information
The consolidated financial information represents the results of Made Tech
Group Plc (the "Company") and its subsidiary, together comprising the Group
("Made Tech Group Plc" or the "Group").
Made Tech Group Plc is a company incorporated and domiciled in England and
Wales, registration number 12204805. The address of its registered office is 4
O'Meara St, London SE1 1TE.
Made Tech Group Plc is quoted on the London Stock Exchange.
The principal activity of Made Tech Group Plc (the "Company") is that of a
holding company. The main trading company of the Group is Made Tech Limited
(company number 06591591) and the principal activity of this company is a
provider of digital, data and technology services to the UK public sector.
Service offerings include digital service delivery, embedded capabilities,
data infrastructure and insights and legacy application transformation.
2. Accounting policies
Accounting convention
The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out below. They have been
consistently applied to the periods presented. The financial statements are
presented in Pounds Sterling rounded to the nearest thousand (£'000) except
where specified.
Basis of preparation of the consolidated financial statements
The Group financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and the Companies Act 2006. The
Company financial statements have been prepared under FRS 102. Both financial
statements have been prepared on the historical cost basis with the exception
of certain items which are measured at fair value as disclosed in the
principal accounting policies set out below. These policies have been
consistently applied to all years presented unless otherwise stated.
Going concern
The Directors have considered the Group's cash flow forecasts and they have no
grounds for concern regarding the Group's ability to meet its obligations as
they fall due and continue to operate within the existing cash balance and
working capital facilities, thus requiring no additional funding to maintain
liquidity.
In reaching their decision to prepare the financial statements on a going
concern basis, the Directors have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for
at least 12 months from the date of approval of the financial statement.
Accordingly, they continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
Standards and amendments to existing standards adopted in these accounts
In the current year, the Group has applied the following standards and
amendments for the first time for its annual reporting period commencing 1
June 2023:
● IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors (Amendment - Definition of
Material);
● IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Introduce a new definition for accounting estimates); and
● IAS 12 Income Taxes (Amendment - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction).
● The standards and amendments effective have not had any significant impact on
the disclosures or on the amounts reported in these financial statements, and
no significant impact expected for standards in issue but not in effect.
Standards, amendments and interpretations to existing standards that are not
yet effective and have not been early adopted by the Company in the 31 May
2024 financial statements
At the date of authorisation of these financial statements, certain new
accounting standards and interpretations have been published that are not
mandatory for 31 May 2024 reporting periods and have not been early adopted by
the Group. The Directors continue to monitor developments in the accounting
standards they see as relevant, but do not expect that the adoption of these
standards will have a material impact on the financial statements of the Group
in the current or future reporting periods and on foreseeable future
transactions.
Basis of consolidation
The Group's consolidated financial statements incorporate the results of the
parent company and all of its subsidiary undertakings. The parent controls a
subsidiary if it is exposed, or has rights, to variable returns from its
involvement with the subsidiary and has the ability to affect those returns
through its power over the subsidiary. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated on the date control ceases.
Inter-company transactions, balances and unrealised gains and losses (where
they do not provide evidence of impairment of the asset transferred) on
transactions between Group companies are eliminated.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with policies adopted by the Group.
Revenue recognition
Revenue is the fair value of the total amount receivable by the Group for
supplies of services. VAT or similar local taxes and trade discounts are
excluded. The Group's source of revenue is from the provision of digital, data
and technology services to the UK public sector and product subscription and
support services.
The majority of the provision of services contracts are typically "time and
materials" whereby the customer is contractually bound to pay for services for
each hour or day spent in delivering a contractually agreed services scope.
Materials are incidental expenses incurred whilst delivering the services.
These contracts typically have no payment milestones or bundling with other
services and have no variable element. Revenue is therefore recognised in line
with the chargeable "time and materials" which are allocated to the contracted
project. The Company recognises revenue each month once as it provides these
services for the duration of the contract. At the balance sheet date, an asset
is recognised for unbilled amounts for services provided yet to be invoiced.
Payment for the services is based on the agreed payment terms.
For fixed-price service contracts, the company recognises the revenue when the
performance obligation is satisfied, which may be by the completion and
approval of milestones described and priced in the contract or based on the
actual labour hours and costs incurred at the end of the reporting period when
performance obligations over time criteria have been met.
For product subscription contracts the client pays fees at regular intervals
to access the functionalities, support and maintenance of the software.
Current contracts are recognised ratably over the contract term.
Revenue contract liability is recorded when cash payments are received in
advance of satisfying the performance obligation. Contract liabilities are
recognised in profit or loss in the period when the Group completes the agreed
services to the customers. In all other cases payments are due from customers
within 30-60 days (depending on the credit terms applicable) of the service
being agreed and invoiced.
Interest income and expenditure are reported on an accruals basis.
EBITDA and adjusted EBITDA
Earnings before interest, taxation, depreciation and amortisation ("EBITDA")
and adjusted EBITDA are non‑GAAP measures used by management to assess the
operating performance of the Group. EBITDA is defined as operating profit
before depreciation and amortisation. Exceptional items, amortisation of
intangible assets, impairment and share-based payment charges are excluded
from EBITDA to calculate adjusted EBITDA.
The Directors primarily use the adjusted EBITDA measure when making decisions
about the Group's activities. As they are non-GAAP measures, EBITDA and
adjusted EBITDA measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
Exceptional items
The Group's income statement separately identifies exceptional items. Such
items are those that in the Directors' judgement are one off in nature or
non-operating and need to be disclosed separately by virtue of their size or
incidence. In determining whether an item should be disclosed as an
exceptional item, the Directors consider quantitative and qualitative factors
such as the frequency, predictability of occurrence and significance. This is
consistent with the way financial performance is measured by management and
reported to the Board.
Intangible assets
Internally generated intellectual property
An internally generated intangible asset consisting of intellectual property
arising from development (or the development phase) of an internal project is
recognised if, and only if, all of the following have been demonstrated:
● the technical feasibility of completing the intangible asset so that it will
be available for use or sale;
● the intention to complete the intangible asset and use or sell it;
● the ability to use or sell the intangible asset;
● how the intangible asset will generate probable future economic benefits;
● the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
● the ability to measure reliably the expenditure attributable to the intangible
asset during its development.
The amount initially recognised for internally generated intangible assets is
the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above. Where no internally
generated intangible asset can be recognised, development expenditure is
charged to profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses. Internally generated intangibles not yet in use are not amortised but
are subject to annual impairment testing.
Internally generated intangible assets have been amortised over three to five
years.
Research expenditure is recognised as an expense in the period in which it is
incurred.
Tangible assets
Tangible assets are recorded at cost net of accumulated depreciation and any
provision for impairment. Depreciation is provided to write off the cost of
the asset less any residual value over its useful economic life in line with
below. The residual values of assets are reviewed annually and revised where
necessary. Assets' useful economic lives are as follows:
Furniture and
fittings
25% reducing balance
Office
equipment
3 years straight line
Leasehold improvements
25% reducing balance
Right-of-use lease
assets straight line
over the lease term
Impairment
For the purposes of assessing impairment, assets are grouped at the lowest
level for which there are separately identifiable cash flows. As a result,
some assets are tested individually for impairment and some are tested at
cash-generating unit level.
Intangible assets not yet available for use are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the carrying amount exceeds the recoverable amount of the
asset or cash-generating unit. The recoverable amount is the higher of fair
value, reflecting market conditions, less costs to sell, and value in use
based on an internal discounted cash flow evaluation. The cash flow
evaluations are a result of the Directors' estimation of future sales and
expenses based on their past experience and the current market activity within
the business. All assets are reassessed and impairment losses previously
recognised may be reversed where the recoverable amount exceeds the carrying
value in subsequent periods.
Any impairment charge arising from the review of the carrying value of assets,
where material, is disclosed separately on the face of the consolidated income
statement.
Financial assets
Financial assets and liabilities are recognised when the Group becomes party
to the contractual obligations of a financial instrument. They are measured
initially at fair value, net of transaction costs. The Group subsequently
classifies and measures its financial assets as either financial assets at
fair value through profit or loss, at amortised cost, or fair value through
comprehensive income, as appropriate. The classification depends on the
purpose for which the financial assets were acquired. At the reporting year
end the financial assets of the Group were all classified as loans or
receivables held at amortised cost.
Trade receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through the provision of goods and services to customers but also incorporate
other types of contractual monetary assets.
They are initially recognised at fair value and measured subsequent to initial
recognition at amortised cost using the effective interest method, less any
impairment loss.
The Group's financial assets comprise trade receivables, other receivables
(excluding prepayments) and cash and cash equivalents.
Trade and other receivables - impairment
The Group applies an expected credit loss model to calculate the impairment
losses on its trade receivables. The Group applies the simplified approach to
providing for expected credit losses prescribed by IFRS 9, which permits the
use of the lifetime expected loss provision for all trade receivables. Trade
receivables at the reporting date have been put into groups based on days past
the due date for payment and an expected loss percentage has been applied to
each group to generate the expected credit loss provision for each group and a
total expected credit loss provision has thus been calculated.
Financial liabilities
The Group's financial liabilities include trade and other payables and
borrowings which include lease liabilities.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest-related charges are
recognised as an expense in the income statement.
Trade payables are recognised initially at their fair value, net of
transaction costs and subsequently measured at amortised cost less settlement
payments.
Taxation
Current tax
Current income tax assets and liabilities comprise those obligations to fiscal
authorities in the countries in which the Group carries out its operations.
They are calculated according to the tax rates and tax laws applicable to the
fiscal period and the country to which they relate. All changes to current tax
liabilities are recognised as a component of tax expense in the income
statement unless the tax relates to an item taken directly to equity, in which
case the tax is also taken directly to equity. Tax relating to items
recognised in other comprehensive income is recognised in other comprehensive
income.
Deferred tax
Deferred income taxes are calculated using the liability method on temporary
differences between the carrying amounts of assets and liabilities and their
tax bases.
A deferred tax asset is recognised for all deductible temporary differences to
the extent that it is probable that taxable profit will be available against
which the deductible temporary differences can be utilised. Deferred tax
is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or, at the time of the transaction, affects neither
accounting profit nor taxable profit (tax loss). Deferred tax on temporary
differences associated with shares in subsidiaries is not provided if reversal
of these temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future. In addition,
tax losses available to be carried forward as well as other income tax credits
to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets,
such as those resulting from assessing deferred tax on the expense of
share-based payments, are recognised to the extent that it is probable that
future taxable profits will be available against which the temporary
differences can be utilised. Deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
balance sheet date.
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the present obligations arising from legal or
constructive commitment resulting from past events will probably lead to an
outflow of economic resources from the Group which can be estimated reliably.
Provisions are measured at the present value of the estimated expenditure
required to settle the present obligation, based on the most reliable evidence
available at the reporting date taking into account risks and uncertainties
surrounding the obligation.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimates.
Employee benefits
The Group provides a range of benefits to employees, including annual bonus
arrangements, paid holiday arrangements and defined contribution pension
plans.
Short-term benefits, including holiday pay and other similar non-monetary
benefits, are recognised as an expense in the period in which the service is
received.
Termination benefits are recognised immediately as an expense when the Group
is demonstrably committed to terminate the employment of an employee or to
provide termination benefits.
Defined contribution pension plan
The Group operates a defined contribution pension scheme. The assets are held
separately from those of the Company in an independently administered fund.
The pension cost charge represents contributions payable by the Company to the
fund.
The cost of pensions in respect of the Group's defined contribution scheme is
charged to the income statement in the period in which the related employee
services were provided.
Share-based payments
The Group operates equity settled share-based compensation plans for the
remuneration of its employees.
All employee services received in exchange for the grant of any share-based
compensation are measured at their fair values. These are indirectly
determined by reference to the share options awarded. Their value is appraised
at the grant date and excludes the impact of any non-market vesting
conditions (e.g. profitability or sales growth targets).
All share-based compensation is ultimately recognised as an expense in the
income statement with a corresponding credit to the share-based payment
reserve, net of deferred tax where applicable. If vesting periods or other
vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected
to vest. Fair value of the awards are measured using the Black-Scholes
valuation model or Monte Carlo simulation when there are non-market vesting
conditions of the shares issued. Non-market vesting conditions are included in
assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised if there is any indication
that the number of share options expected to vest differs from previous
estimates. No adjustment to expense recognised in prior periods is made if
fewer share options ultimately are exercised than originally estimated. The
impact of the revision of the original estimates, if any, is recognised in the
statement of comprehensive income over the remaining vesting period, with a
corresponding adjustment to the share-based payment reserve.
Equity and reserves
Issued share capital
Ordinary shares are classified as equity. The nominal value of shares is
included in share capital.
Share premium
The share premium account represents the excess over nominal value of the fair
value of consideration received for equity shares, net of the expenses of the
share issue.
Share-based payment reserve
The share-based payment reserve represents the total value expensed at the
balance sheet date in relation to the fair value of the share options at their
grant date expensed over the vesting period under the relevant share
option schemes.
Accumulated deficit
The retained earnings include all current and prior period results for the
Group and the results of the Group's subsidiaries as determined by the income
statement net of dividends paid.
Dividends
Final equity dividends to the shareholders of the Group are recognised in the
period that they are approved by shareholders. Interim equity dividends are
recognised in the period that they are paid. Dividends receivable are
recognised when the Group's right to receive payment is established.
3. Judgements in applying accounting policies and key sources of
estimation uncertainty
The preparation of financial statements requires management to make
judgements, estimations and assumptions that affect the amounts reported for
assets and liabilities as at the year-end date and the amounts reported for
revenues and expenses during the year. These judgements and estimates are
based on management's best knowledge of the relevant facts and circumstances,
their historical experience and other factors including expectations of future
events. Actual results may differ from the amounts included in the financial
statements. The estimates and assumptions that have a significant risk of
material adjustment to the carrying amount of assets and liabilities within
the next financial year are summarised below:
Judgements in applying accounting policies
Development costs
Capitalisation of development costs in accordance with IAS 38 requires
analysis of the technical feasibility and commercial viability of the project
in the future. This in turn requires a long-term judgement to be made about
the development of the industry in which the development will be marketed.
Where the Directors consider that sufficient evidence exists surrounding the
technical feasibility and commercial viability of the project which indicates
that the costs incurred will be recovered they are capitalised within
intangible fixed assets. The amount of the capitalisation is based on
estimates to judge the percentage of the time relevant staff spend on
projects. Where insufficient evidence exists, the costs are expensed to the
income statement.
Sources of estimation uncertainty
Intangible assets useful life
The useful life of the Group's intangible assets has been estimated based on
the classification of intellectual properties into two categories: Technology
Platforms and Capability IP. Management's judgement in this estimation
process incorporates a comprehensive analysis of market conditions, potential
client needs, competitive developments, and internal expertise to assess the
obsolescence risk associated with the developed technology.
In accordance with IFRS, the Group will review the estimated useful lives of
these intangible assets at least annually and adjust them as necessary to
reflect changes in circumstances or expectations regarding their economic
benefits. Please refer to note 10 for more details.
Impairment of intangible assets
Determining whether intangible assets are impaired requires an estimation of
the value in use of the cash‑generating unit to which the intangibles have
been allocated. The value in use calculations require an estimation of the
future cash flows expected to arise from the cash-generating units and a
suitable discount rate to calculate the present value.
An assessment of impairment of intangibles is performed if there is an
indicator of impairment. The key estimate for the carrying value of the
intangibles is the cash flows associated with the investment and the Weighted
Average Cost of Capital ("WACC"). Each intangible is reviewed regularly to
ensure that it generates discounted positive cash flows.
Where there is an indication of impairment, the investment is impaired by a
charge to the consolidated income statement. The key area of uncertainty is
revenue growth and WACC. Management performs sensitivity analysis to ascertain
the level of growth rate and assumptions on the WACC that will start to impair
the investment on a yearly basis. Please refer to note 10 for more details.
4. Financial instruments - risk management
The Board of Directors of Made Tech Group Plc has overall responsibility for
the determination of the Group's risk management objectives and policies. The
Group has in place a risk management programme that seeks to limit the adverse
effects on the financial performance of the Group. All funding requirements
and financial risks are managed based on policies and procedures adopted by
the Board.
The Group does not enter into derivative transactions or trade in financial
instruments and the Directors believe the Group is not materially exposed to
commodity price risk.
The Group is exposed to the following financial risks:
● credit risk;
● liquidity risk; and
● interest rate risk.
The Group is exposed to risks that arise from its use of financial
instruments. The principal financial instruments used by the Group, from which
financial instrument risk arises, are as follows:
● trade and other receivables;
● cash and cash equivalents; and
● trade and other payables.
To the extent financial instruments are not carried at fair value in the
consolidated statement of financial position, book value approximates to fair
value.
Trade and other receivables are measured at amortised cost. Book values and
expected cash flows are reviewed by the Board and any impairment charged to
the consolidated statement of comprehensive income in the relevant period.
Trade and other payables are measured at amortised cost.
Financial instruments by category
Financial assets At 31 May 2024 £'000 At 31 May 2023 £'000
Cash and cash equivalents 7,648 8,474
Trade receivables 4,429 4,304
Other receivables 2,233 1,889
Financial assets at amortised cost 14,310 14,667
Financial liabilities At 31 May 2024 £'000 At 31 May 2023 £'000
Current
Trade payables 356 1,634
Accruals 1,469 1,005
Social security and other taxes 623 1,889
Other payables 646 208
Trade and other payables 3,094 4,736
Current
Borrowings - lease liability - 140
Loans and borrowings - 140
Financial liabilities at amortised cost 3,094 4,876
The key risks to the Group and the policies and procedures put in place by
management to manage them are summarised below:
Interest rate risk
The Group is exposed to cash flow interest rate risk from bank borrowings at
variable rates. The Group's bank borrowings are disclosed in note 13. As at 31
May 2024 there are no loans outstanding (FY23: £nil); therefore there is no
significant exposure to interest rate risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from credit sales. The
Group's net trade receivables for the two reported periods are disclosed in
the financial assets table above.
The Group considers that its exposure to credit risk is negligible as it
primarily carries out work for public sector entities without the risks
attached to normal commercial credit sales.
The Directors do not consider that there is any significant concentration of
risk within other receivables.
Credit risk on cash and cash equivalents is considered to be small as the
counterparties are substantial banks with high credit ratings. The maximum
exposure is the amount of the deposit. To date, the Group has not experienced
any losses on its cash and cash equivalent deposits.
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
At 31 May 2024 Within 1 month 1-3 months 3-12 months 2-5 years 5+ years
£'000 £'000 £'000 £'000
Trade Payables 316 40 - - -
Accruals 1,290 179 - - -
Other payables 1,269 - - - -
2,875 219 - - -
At 31 May 2023 Within 1 month 1-3 months 3-12 months 2-5 years 5+ years
£'000 £'000 £'000 £'000
Trade Payables 1,634 - - - -
Accruals 554 257 194 - -
Other payables 2,097 - - - -
Lease liability - 47 93 - -
4,285 304 287 - -
Capital management
The Group's capital is made up as follows:
At At
31 May 2024 31 May 2023
£'000 £'000
Share capital - issued 75 75
Share premium 13,433 13,433
Share based payment reserve 4,129 4,398
Accumulated deficit (5,148) (2,695)
12,489 15,211
The Group's objectives when maintaining capital are:
● to safeguard the entity's ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other
stakeholders; and
● to provide an adequate return to shareholders by pricing services
commensurately with the level of risk.
The capital structure of the Group consists of shareholders' equity as set out
in the consolidated statement of changes in equity. All working capital
requirements are financed from existing cash resources and fundraising.
5. Operating profit/(loss)
The operating profit/(loss) has been arrived at after charging/(crediting):
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Fees paid to the Group's auditors (see below) 65 56
Other accountancy fees 29 26
Loss on disposal of property, plant and equipment 8 9
Advertising expense 329 548
Depreciation of property, plant and equipment and amortisation of intangible 1,212 417
assets
Staff costs 26,903 30,904
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Analysis of the fees paid to the Group's auditors
Audit of the Group and Company's financial statement 65 56
Total fees paid to Groups auditors 65 56
6. Interest receivable/(payable)
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Interest received 248 25
Interest on bank loans and bank fees (12) (4)
Interest on lease liability (2) (10)
Total interest receivable/(payable) 234 11
7. Exceptional items
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Termination costs - 493
Restructuring costs - 81
Total exceptional items - 574
There were no exceptional items in FY24. In FY23 exceptional costs related
to severance costs for exiting employees and restructuring costs relating to
reorganisation improvements.
8. Taxation
The following tax was recognised in the income statement:
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Corporation tax - -
Total current tax expense - -
R&D tax credit (502) -
Deferred tax
Origination and reversal of timing differences (42) 72
Tax charge for the year (544) 72
The tax assessed for the year is different from the standard rate of
corporation tax as applied in the respective trading domains where the Group
operates.
The Group's tax charge can be reconciled to the profit/(loss) in the income
statement and effective tax rate as follows:
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Loss before tax (2,997) (1,527)
Tax credit at the UK corporation tax rate of 25% (FY23: 20%) (749) (305)
Effects of:
Fixed asset differences 38 37
Expenses not deductible for tax purposes 1,297 461
Utilisation of losses brought forward (456) (28)
Unused tax losses 173 462
IP capitalisation (314) (622)
R&D tax credit (502) -
Sundry items 11 (5)
Movements in deferred tax provision (42) 72
Tax charge for the year (544) 72
Deferred tax Year to Year to
31 May 2024 31 May 2023
£'000 £'000
At 1 June 92 20
Deferred tax recognised - -
Charge (42) 72
At 31 May 50 92
Current taxes comprise the income taxes of the Group companies which posted a
taxable profit for the year, while deferred taxes show changes in deferred tax
assets and liabilities which were recognised by the Group on the temporary
differences between the carrying amount of assets and liabilities and their
amount calculated for tax purposes and, on consolidation adjustments,
calculated using the rates that are expected to apply in the year these
differences will reverse.
No deferred tax has been provided on share based payments amounting to
£35,155.
At the reporting date, the Group has unused tax losses of £0.7m (FY23:
£3.1m) available for offset against future profits. No deferred tax asset has
been recognised in respect of these losses due to the uncertainty of the
timing of future taxable profits forecast at the balance sheet date.
9. Loss per ordinary share
Loss per ordinary share Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Loss for the period (2,453) (1,599)
Weighted average number of ordinary share in issue for the year ('000) 149,287 148,885
Loss per ordinary share (pence)
Basic loss per share (1.64p) (1.07p)
Diluted loss per share (1.64p) (1.07p)
Where a loss has been recorded the effect of options is not dilutive and
therefore the basic and diluted figure is the same.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares. The Company has potentially dilutive ordinary shares arising from
share options granted to employees. Options are dilutive under the Group
Restricted Share Plan ("RSP") where the exercise price, together with the
future IFRS 2 charge of the option, is less than the average market price of
the Company's ordinary shares during the year. Options under the LTIP schemes,
as defined by IFRS 2, are contingently issuable shares and are therefore only
included within the calculation of diluted EPS if the performance conditions,
as set out in note 15, are satisfied at the end of the reporting period,
irrespective of whether this is the end of the vesting period or not.
The calculation of adjusted earnings per share is based on the after tax
adjusted operating loss after adding back certain costs as detailed in the
table below. Adjusted earnings per share figures are given to exclude the
effects of share-based payments and exceptional items, all net of taxation,
and are considered to show the underlying performance of the Group.
The adjusted basic earnings per share is calculated by dividing the adjusted
profit/(loss) after tax for the year by the weighted average number of
ordinary shares in issue during the period.
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Loss for the period (2,453) (1,599)
Share based payments (including associated taxes) 80 2,068
Exceptional items (502) 574
Impairment of intangible 4,315 -
Tax effect of the above (20) (528)
Adjusted profit after tax for the year 1,420 515
Weighted average number of ordinary share in issue for the year ('000) 149,287 148,885
Effect of dilutive potential ordinary shares from share options 5,409 4,097
Weighted average number of ordinary shares for the purposes of diluted 154,696 152,982
earnings per share ('000)
Adjusted Basic earnings per share 0.95p 0.35p
Adjusted diluted earnings per share 0.92p 0.34p
10. Intangible assets
Intangible assets relate to development activities to develop new software
products (IP) to improve existing and/or create new products. All intangible
assets have an identifiable future economic benefit to the Group at the point
the costs are incurred.
Technology Platforms Capability IP £'000 Total
£'000 £'000
Cost
At 1 June 2022 1,904 - 1,904
Additions 592 2,517 3,109
At 31 May 2023 2,496 2,517 5,013
Additions 1,257 - 1,257
At 31 May 2024 3,753 2,517 6,270
Amortisation
At 1 June 2022 - - -
Charge for period - - -
At 31 May 2023 - - -
Charge for period 275 560 835
Impairment 3,478 837 4,315
At 31 May 2024 3,753 1,397 5,150
Net book value
At 31 May 2022 2,496 2,517 5,013
At 31 May 2024 - 1,120 1,120
The Group has classified its intangible assets into two types of intellectual
property: Technology Platforms and Capability IP. During the year the Group
has capitalised costs relating to the ongoing development of its Technology
Platforms, being SaaS solutions aimed primarily at the Local Government
housing market. After initial sales Made Tech has moved to the
commercialisation phase of these products. Technology Platforms comprise 5
CGUs; amortisation of four of the CGUs commenced in June 2023 as
commercialisation of the products began and they are amortised over five
years. Personnel costs of £1,256,899 (FY23: £3,028,623) have been
capitalised during the year related wholly to Technology Platforms.
Capability IP comprises 7 Cash Generating Units ("CGUs") based around some of
the core capabilities of the Group such as Data & AI, and
Transformation. Amortisation of all Capability IP CGUs, other than Academy,
commenced in June 2023 over a useful life of three years.
Intangible assets have been tested for impairment by assessing the value in
use of the CGUs. The value in use calculations were based on projected cash
flows over the estimated useful economic life of the assets with no terminal
rate being applied. Varying growth rates derived from market demand and an
assessment of the assets' development pipeline were applied. The annual growth
rates assumed for Technology Platforms IP was between c.0% and c.40%,
dependent on the specific SaaS product. An annual growth rate of c.8% was
assumed for the Capability IPs, excluding the Academy which was assumed to
generate no revenue, on a total basis.
The discount rate used to test the cash-generating units used the Group's
pre-tax WACC of 40.2%, being the equivalent of a post-tax WACC of 16.5% (FY23:
12.4%). The value in use calculations using the above growth assumptions
indicated an impairment on all the Company's Technology Platforms and Academy
Capability IP. As a result an impairment charge of £4,314,690 has been
booked in the year (FY23: nil). Following the early commercialisation of the
Technology Platforms it has become evident that the sales cycles to local
government clients was longer than originally anticipated, thus reducing the
contribution that the SaaS products were forecast to deliver over the next
four years. Nevertheless the Company continues to pursue the commercialisation
of the Technology Platform IP in what management view as a large, compelling
and fragmented market. Made Tech had invested in its Academy IP to operate
as an apprenticeship provider, working alongside government departments
including the HMRC. However, changes in demand by government clients mean
that the Board no longer views this as a core revenue generating offering and
therefore as a result have impaired the full carrying value of the asset.
Additional sensitivity analyses were run on all the remaining Capability IP.
Assuming nil growth in Capability IP revenue over the remaining useful
economic life of the intangible assets, and using a post-tax WACC discount of
16.5%, an additional impairment of c.£405,000 was indicated. Assuming a
20.0% post-tax WACC and nil growth (with other assumptions remaining constant)
an additional impairment of c.£22,000, when compared with sensitivity using
the 16.5% post-tax WACC discount rate, was indicated. Management does not
consider that any reasonably possible changes in the assumptions would result
in an impairment. The assumptions used in the impairment review are
subjective and provide key sources of estimation uncertainty, specifically in
relation to growth assumptions, future cash flows and the determination of
discount rates. The actual results may vary and accordingly may cause
adjustments to the Group's valuation in future years.
11. Tangible assets
Furniture, fittings and equipment
Land and buildings £'000 Right-of-use assets
£'000 £'000 Total
£'000
Cost
At 1 June 2022 33 885 766 1,684
Additions - 60 - 60
Disposals - (106) - (106)
At 31 May 2023 33 839 766 1,638
Additions 5 84 - 89
Disposals - (53) - (53)
At 31 May 2024 38 870 766 1,674
Depreciation
As at 1 June 2022 21 303 481 805
Charge for period 3 260 154 417
Eliminated on disposal - (83) - (83)
At 31 May 2023 24 480 635 1,139
Charge for period 3 243 131 377
Eliminated on disposal - (45) - (45)
At 31 May 2024 27 678 766 1,471
Net book value
At 31 May 2023 9 359 131 499
At 31 May 2024 11 192 - 203
12. Leases
The Company leases office premises. Under IFRS 16 this lease has been
classified as a right-of-use asset. The lease liability is included within
tangible assets on the statement of financial position. The long-term lease
ended in April 2024 and the new agreement was signed for 12 months. There are
no other long-term leased assets.
Right-of-use assets Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Balance as at 1 June 131 285
Depreciation charge for year (131) (154)
Balance at 31 May - 131
Lease liability
Maturity analysis - contractual discounted cash flows
Less than one year - 140
One to five years - -
Total lease liabilities at 31 May - 140
Lease liabilities included in the statement of financial position:
Current - 140
Non-current - -
Amounts recognised in the Consolidated income statement
The Consolidated income statement shows the following amounts relating to
leases:
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Interest paid on lease liability 2 10
Any expense for short-term and low value leases is not material and has not
been presented.
13. Analysis of net debt
Lease liabilities
Cash Bank loans £'000 Total
£'000 £'000 £'000
At 1 June 2022 12,333 - (320) 12,013
Working capital movements (3,859) - - (3,859)
Payment of lease liabilities - - 180 180
At 31 May 2023 8,474 - (140) 8,334
Working capital movements (826) - - (826)
Payment of lease liabilities - - 140 140
At 31 May 2024 7,648 - - 7,648
14. Deferred tax
Deferred tax liabilities are analysed as follows.
Year to Year to
31 May 2024 31 May 2023
£'000 £'000
Accelerated capital allowances (50) (92)
Tax losses - -
Total deferred tax liability (50) (92)
Changes during each year are as follows:
Accelerated capital allowances Tax losses Total
£'000 £'000 £'000
Balance at 1 June 2022 (167) 147 (20)
Tax (charge)/credit in respect of current year 75 (147) (72)
Balance at 31 May 2023 (92) - (92)
Tax credit in respect of current year 40 - 40
Balance at 31 May 2024 (50) - (50)
15. Share-based payments
In the year ended 31 May 2024 the Group recognised total expenses of £80,463
(FY23: £2,068,000) in respect of equity‑settled share-based payment awards
under IFRS 2 Share-based Payment.
Details of the maximum number of ordinary shares which may be issued in future
periods in respect of LTIP awards and RSAs outstanding at 31 May 2024 are
shown below:
LTIP RSAs Total Number of shares
Number of shares Number
of shares
At 1 June 2023 1,121,923 3,207,665 4,329,588
Granted 4,697,520 381,690 5,079,210
Forfeited (2,590,129) (391,888) (2,982,017)
Exercised (122,951) (894,706) (1,017,657)
At 31 May 2024 3,106,363 2,302,761 5,409,124
All forfeited options relate to employees who left during the period.
Share awards granted in the year ended 31 May 2024 were limited to below Board
employees and structured as either performance related LTIPs or Restricted
Share Awards. The LTIP awards are based on the achievement of challenging
performance criteria over the respective vesting periods as set out below.
Performance targets include absolute total shareholder return ('TSR'), EPS
growth, and employee net promoter scores ('eNPS'). The likelihood of the
performance criteria being achieved has been factored into the calculation of
the share based payment charge.
Restricted Share Awards ('RSAs') vest annually based on continuing service but
are not subject to other performance conditions. As such, the IFRS 2
Share-based Payment fair value of each RSA award granted was equal to the face
value of awards. Details of the awards granted during FY24 are shown below.
All options over shares have a nil exercise price.
LTIPs FY23* LTIPs FY23* LTIPs FY24** RSAs RSAs
25 July 2023 25 July 2023 25 July 2023 25 July 2023 18 October 2023
Awards 1,176,472 470,588 3,050,460 281,690 100,000
Vesting Absolute TSR, EPS and eNPS Absolute TSR, EPS and eNPS Absolute TSR, EPS and eNPS Tranched vesting Tranched vesting
Share price at grant date (pence) 17 17 17 17 27
Exercise price (pence) 0 0 0 0 0
Expected volatility 40% 40% 40% 0 0
Expected life (years) 2 3 3 3 1,2,3
Expected dividend yield 0% 0% 0% 0% 0%
Risk-free interest rate 0.39% 0.39% n/a n/a n/a
Fair value (pence) - holding period n/a 6 6 n/a n/a
Fair value (pence) - no holding period 6 n/a 6 17 27
*The vesting of these LTIP awards is subject to the Group achieving the
following performance targets:
Performance conditions Weighting Performance targets
Absolute TSR performance 40% TSR growth over a 3 year period from 31/05/2022
EPS 40% Growth in EPS over a 3 year period from the financial year 31/05/2022
eNPS 20% Improvement in eNPS measured over a 3 year period from 31/05/2022
**The vesting of these LTIP awards is subject to the Group achieving the
following performance targets:
Performance conditions Weighting Performance targets
Absolute TSR performance 40% TSR growth over a 3 year period from 31/05/2023
EPS 40% Growth in EPS over a 3 year period from the financial year 31/05/2023
eNPS 20% Improvement in eNPS measured over a 3 year period from 31/05/2023
During the year Made Tech established an Employee Benefit Trust for the
settlement of share option awards. The Group contributed £350,000 to the EBT
during the year and the EBT acquired 2,402,738 shares in the Company. The EBT
has distributed 289,580 shares in settlement of the exercise of options.
16. Related party transactions
Details of key management personnel's compensation are given in the Directors'
Remuneration Report of the FY24 Annual Report.
There were no other related party transactions during the year ended 31 May
2024.
17. Post balance sheet events
There are no significant events after the balance sheet date to report.
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