REG - TPXimpact Holdings - Interim Results
05/12/2023 07:00
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RNS Number : 6356V TPXimpact Holdings PLC 05 December 2023
5 December 2023
TPXimpact Holdings PLC
("TPXimpact", the "Company or the "Group"")
Interim Results
Strong first half performance in line with management expectations
TPXimpact Holdings PLC (AIM: TPX), the technology-enabled services company
focused on people-powered digital transformation, is pleased to announce its
interim results for the six months ended 30 September 2023.
Financial highlights(1):
● Revenue (like-for-like) up over 22% to £41.6m (H1 2023: £34.1m)
● Acceleration in revenue growth as the year has progressed: 7% in Q1, 38% in Q2
● Record new business wins of £105m in the first half, including previously
announced significant contracts with the Department for Education and His
Majesty's Land Registry
● Adjusted EBITDA(2) of £2.0m (H1 2023: £0.9m) with Adjusted EBITDA(2) margin
increasing to 4.8% (H1 2023: 2.6%)
● Reported operating loss of £(9.0)m (H1 2023: £(3.9)m), after including
£5.6m (H1 2023: £Nil) non-cash goodwill impairment charge
● Adjusted profit before tax (2) of £0.6m (H1 2023: £0.4m)
● Reported loss before tax £(10.1)m (H1 2023: £(4.3)m)
● Adjusted diluted earnings(2) per share of 0.5p (H1 2023: 0.4p)
● Reported diluted loss per share of (10.2)p (H1 2023: (4.1)p)
● Net debt(2) (excluding lease liabilities) as at 30 September 2023 of £12.8m
(31 March 2023: £17.5m)
● Comfortable headroom against new debt covenants reset in June 2023
Operational and Impact highlights:
● Over 90% of H1 revenues came from public services clients
● Department for Education and His Majesty's Land Registry engagements now fully
mobilised and progressing in line with expectations
● Completed sale of Questers for £7.5m cash in September 2023; disposed of
TPXimpact Norway as announced on 18 September and 16 October 2023,
respectively
● New talent recruited to lead our commercial and technology capabilities
● Staff retention rates improved to a run-rate of 86% on an annualised basis
● Total headcount (including contractors) of around 700 people: permanent staff
(FTE) numbers increased (like-for-like) by over 9% in H1 to 535 and the number
of contractors fell by almost 20% to 162
● New London hub is now fully operational; new lease signed for Chesterfield hub
● Accreditation of ISO 27001, ISO 9001 and the UK National Cyber Security
Centre's (NCSC) Cyber Essentials accreditation
● Carbon footprint reduced by 7% partly due to relocation of London hub; further
reductions expected in H2 due to Questers disposal
● Female representation stands at 51% (H1 2023: 49%) and ethnic minority
representation stands at 20% (H1 2023: 19%)
Post-period outlook
● TPXimpact continues to trade in line with the targets announced at the
beginning of FY 2024 and expects to deliver revenue in the range of £80-85
million and Adjusted EBITDA in the range of £4-5 million for the full year
● Backlog or committed revenue now represents almost 90% of full year projected
revenues and the pipeline of potential new business remains encouraging
(1) Unless otherwise stated financial measures are based upon the results of
continuing operations.
(2)In measuring our performance, the financial measures that we use include
those which have been derived from our reported results in order to eliminate
factors which distort period-on-period comparisons. These are considered
non-GAAP financial measures, and include measures such as like-for-like
revenue, adjusted EBITDA and net debt. All are defined in note 9.
Bjorn Conway, Chief Executive Officer, commented:
"I am delighted by the way the business unit leadership and their teams have
responded to the new vision and strategy for TPXimpact, enabling us to deliver
strong business results in the first half of FY24.
Like-for-like revenue increased over 22% and adjusted EBITDA margin at almost
5% compares well with less than 3% for FY23. The Group is on track to meet the
guidance we issued at the start of the year with revenue growth of 15-20%
and adjusted EBITDA margin of 5-6%. This is a significant improvement on FY23
and a sign that our focus on our customers, our people, and operational
improvements is producing the intended results.
The major wins of up to £49m at His Majesty's Land Registry and up to £27.5m
at the Department for Education demonstrate the scale and breadth of
capability that we can bring through working together effectively to deliver
Digital Transformation and the positive impact we can have on systems that
touch the lives of many tens of thousands of people.
Equally, our Digital Experience business dramatically improves the connection
between organisations and the public as evidenced by our award winning work
with the Zoological Society of London and our impressive work with Breast
Cancer Now to support their mission to eradicate breast cancer.
We have made excellent progress in advancing our 3-year strategy to simplify
the wider business and invest in creating our exciting Digital Transformation
and Digital Experience businesses as the core platforms for future growth. The
next 6-12 months will see these integrations completed to enable the core
businesses to flourish.
12 months into the role of CEO at TPXimpact, my initial impressions of the
passion, capability and commitment of the teams have been validated and I am
energised by their enthusiasm for making the business better and delivering
the best outcomes for our customers."
Enquiries:
TPXimpact Holdings PLC Via Alma
Bjorn Conway, Group CEO
Steve Winters, Group CFO
Stifel Nicolaus Europe Limited +44 (0) 207 710 7600
(Nomad and Joint Broker)
Fred Walsh
Ben Burnett
Dowgate Capital Limited +44 (0) 203 903 7715
(Joint Broker)
James Serjeant
Russell Cook
Alma Strategic Communications +44 (0) 203 405 0209
(Financial PR) tpx@almastrategic.com
Josh Royston
Kieran Breheny
Matthew Young
About TPXimpact
TPXimpact exists to transform the organisations, services and systems that
underpin society and that drive business success. It applies strategic and
creative thinking, technology, innovative design and user-centred approaches
to bring about numerous improvements which together multiply the impact of
change.
The Group works closely with its clients in agile, multidisciplinary teams
that span organisational design, technology, and digital experiences. It
shares a deep understanding of people and behaviours and a philosophy of
putting people and communities at the heart of every transformation.
The business is being increasingly recognised as a leading alternative digital
transformation provider to the UK public services sector, with over 90% of its
client base representing public services in the six months ended 30 September
2023.
More information is available at www.tpximpact.com.
CEO's statement
With a new vision and three-year strategic plan, the Group has had a strong
first half, delivering revenue growth and EBITDA margin improvement in line
with management expectations.
Trading performance in the first half was strong with revenues of £41.6
million which equates to like-for-like revenue growth of over 22%. Adjusted
EBITDA margins increased to c.5% compared to less than 3% in H1 2023.
New business wins in the first half amounted to £105m, and the significant
new engagements at the Department for Education for up to £27.5m over two
years, and His Majesty's Land Registry for up to £49m over four years, are
now fully mobilised and progressing in line with expectations.
Net debt (excluding lease liabilities) was £12.8m at 30 September 2023
(compared with £17.5m at 31 March 2023). The Group has comfortably satisfied
its banking covenants which were reset in June 2023.
Our growth has been led by the Consulting business which had a strong first
half, validating our strategy to invest in its operations. This will enable it
to form the bedrock of the future Digital Transformation business which will
also incorporate the Data & Insights and Red Cortex businesses over the
coming months. Meanwhile, our Digital Experience business is well placed to
support our charity clients, who are having to be innovative to maintain
donation levels.
This positive trading performance has been achieved whilst remaining true to
our new PACT (Purpose, Accountability, Craft and Togetherness) values and
delivering a positive impact on the planet, people and places through our
work.
Focus & Balance
The Group has made good progress against its three-year-plan. Our strategic
theme for this year is 'Focus & Balance' and a consequence of 'Focus' is a
decision to invest management time and energy on our future strategic
platforms - Digital Transformation and Digital Experience. It is for this
reason that we took the decision to divest our Bulgarian resourcing business
(Questers) and Norwegian strategy consultancy. As well as more management
focus on the core businesses, the Questers transaction enabled the Group to
reduce Net Debt.
We progressed the integration of three agencies into our Digital Experience
business with an ambition of it becoming the UK's leading purpose-driven
agency. The Digital Experience team has re-focused their new business effort
towards sectors where they hold deep and long-lasting relationships. This
includes partnerships and charities; memberships and events organisations; as
well as a select group of public and commercial entities.
We have also strengthened our new business development and management teams
with the appointment of a Managing Partner for Commercial clients and a Chief
Technology and Innovation Officer to lead our technology and engineering
teams.
Under 'balance' we have worked to make the business better, primarily by
managing for a balance of commercial and purpose outcomes, and in doing so
putting in place the business information tools developed internally by our
Consulting business, and management processes to monitor, predict and manage
key KPIs of utilisation, gross margin by engagement and capability team, and
adjusted EBITDA. This has enabled our businesses to better manage internal and
contractor resources and drive improved business performance. The business
information tools will be adopted by other business units in the second half
of the year.
We have maintained a high level of team member communications and launched our
new PACT values that align closely with the strategic direction of the
business:
o Purpose - positive change with measurable impact
o Accountability - self-organisation and accountability
o Craft - bringing our best capabilities to bear through a shared vision of
excellence
o Togetherness - long-lasting relationships built on honesty, openness, and
trust
Our recent pulse survey showed team member engagement scores improved slightly
to 6.7 from 6.6 against a target of 7.5 Whilst we are working hard to achieve
further progress, we see this as a positive result given the organisational
changes implemented in the first half. Employee retention remains high at 86%,
indicating greater stability in the business.
Our purpose
Our purpose at TPXimpact is to deliver greater outcomes for people, places and
the planet. We are pleased that our carbon emissions reduced by 7% in the
first half of the year (in part due to the move to a single London office with
better sustainability credentials) and expect further reductions in the second
half of the year, reflecting the disposal of Questers. Our purpose team is
also now fully integrated into the operational units of the business,
reinforcing a balanced approach between profit and purpose.
We are also encouraged by the trends we are seeing in diversity and inclusion.
Female representation stands at 51% (H1 2023: 49%), illustrating our
commitment to gender equality. Furthermore, our ethnic minority representation
stands at 20% (H1 2023: 19%).
Appointment of Senior Independent Director
The Board is pleased to announce the appointment of Rachel Neaman as Senior
Independent Director. Rachel already serves as a Non-executive Director of
TPXimpact and brings a wealth of experience of the UK charity and public
sectors. In her new role, Rachel will help ensure the Board and Management
deliver against the balanced needs of our stakeholders.
Market conditions
We continue to see exciting growth opportunities for our core Digital
Transformation and Digital Experience businesses, and our outlook remains
positive. Although a General Election in 2024 may well introduce some degree
of disruption and uncertainty next year, we are encouraged that the policy
agendas of both main political parties place a renewed emphasis on the
importance of digital transformation and citizen engagement, both of which
represent core strengths in our business.
Whilst some industry observers, such as Tech Market View, are predicting an
easing in the rate of growth of the UK digital transformation market in 2024*,
they nevertheless expect demand to be relatively strong, with mid single-digit
CAGR forecast to 2026. This is especially true for our core market of public
services and, within that sector, Central Government (60% of Group revenues).
TPXimpact is increasingly well-placed to increase market share and capitalise
on the opportunities these trends will create.
Bjorn Conway
CEO, TPXimpact
*Tech Market View. UK SITS Consulting Market: Suppliers, Trends &
Forecasts 2022 - 2026
Financial Review
The interim results for the six months ended 30 September 2023 (H1 2024) are
in line with the trading update issued on 16 October 2023 and show strong
growth in revenues, profitability and margins.
As a result of the sale of Questers in September 2023 and TPXimpact Norway in
October 2023, the Group has treated both businesses as discontinued operations
in the first half, and prior period comparatives have been restated
accordingly. Like-for-like performance measures are based on the results of
continuing operations.
Revenues from continuing operations were up 22.1% to £41.6m in the first half
of the year. Growth was driven by our Consulting business (67% of Group
revenues) due to the significant new business wins with Central Government in
the second half of last year and first quarter of this. Revenues in our
Digital Experience business (13% of Group revenues) eased due to clients in
the charitable sector holding back spend. Sequentially, on a like-for-like
basis, Group revenues increased by 7.4% in Q1 and 38.3% in Q2, recovering from
being down 7.2% in the last financial year. New business wins amounted to a
record £105m in the first half.
Public service clients represented over 90% of revenues in the first half,
reflecting the increasing significance of Central Government (60% of revenues)
to the Group, as well as the disposal of our Questers and Norway businesses,
whose client base was largely commercial. Management are committed to
expansion of our commercial sector revenues and have recently introduced new
leadership for both our commercial and technology capabilities.
As revenues grew, so did the cost of sales, which were up over 24% to £30.7m
from £24.7m in H1 2023. Gross profit therefore increased to £10.9m from
£9.3m. Although gross margins reduced to 26.2% from 27.4% in H1 2023, there
was a progressive gross margin improvement from Q1 to Q2 as we completed
recruitment of permanent roles, and reduced reliance on contractors, to
service the expansion in revenues.
Total headcount, including contractors, was around 700 people at both 30
September 2023 and 31 March 2023, on a like-for-like basis. There was,
however, a shift in the mix between permanent FTE staff and contractors: FTE
headcount increased by over 9% to 535 people in the first half, whilst the
number of contractors reduced by almost 20% to 162 people, providing greater
efficiency going into H2. Productivity also improved with increased
utilisation rates, particularly in Consulting. We therefore expect further
improvement in gross margins in the second half of the year. Staff retention
in the first half was 86% (on an annualised basis), a marked improvement on a
year ago.
Adjusted EBITDA of £2.0m and a margin of 4.8% in the first half was
significantly ahead of H123, on a like-for-like basis. All our businesses met
or exceeded budgeted Adjusted EBITDA expectations, with the exception of
RedCortex (6% of Group revenues), which faced softness in client spend in the
health sector in Wales.
The Group made a reported operating loss on continuing operations of £(9.0)m
in the first half against an operating loss of £(3.9)m for the same period
last year. This reflects the £1.6m increase in gross profit explained above,
more than offset by an increase of £6.6m in administrative costs, which was
largely due to a non-cash goodwill impairment charge of £5.6m in relation to
RedCortex. Charges for share-based payments increased to £0.5m (H123: credit
of £0.1m) due to share incentive grants in the second half of last year,
whilst restructuring costs fell to £0.7m (H1 2023: £1.3m).
The Group made an adjusted profit before tax on continuing operations of
£0.6m (H1 2023: £0.4m) and a reported loss before tax of £(10.1)m (H1 2023:
loss of £(4.3)m). Finance costs in the first half increased to £1.1m (H123:
£0.4m) due to increased average borrowings and higher interest rates.
Taxation amounted to a credit of £0.9m (H1 2023: £0.6m) due to deferred tax
credits on amortisation of intangible assets. Adjusted profit after tax on
continuing operations was £0.5m (H123: £0.4m).
The disposal of Questers in September 2023 gave rise to a gain on disposal of
£3.8m which has been included in the income statement within profit after tax
from discontinued operations. The Group's interest in TPXimpact Norway has
been presented as an asset held for sale in the balance sheet at 30 September
2023, prior to its disposal in October 2023. As the Norway disposal was for
nominal consideration of £1, the Group has recorded a goodwill impairment
charge of £1.9m as a cost of discontinued operations in the first half.
Reported diluted earnings per share from continuing operations for the first
half was a loss of (10.2) pence per share (H1 2023: (4.1) pence per share),
reflecting the reported losses in the period, including the goodwill
impairment charge of £5.6m. On an adjusted basis, diluted earnings per share
on continuing operations increased to 0.5 pence per share (H1 2023: 0.4 pence
per share).
Whilst the Board has decided there will be no interim dividend in respect of
the first half of this year (H123: 0.3 pence per share), the improvement in
performance is encouraging and dividend policy will continue to be reviewed on
a regular basis.
Net debt and Cash flow
Net debt (excluding lease liabilities) at 30 September 2023 was £12.8m
compared with £17.5m at 31 March 2023. The decrease in net debt of £4.7m
includes £7.5m of cash proceeds from the sale of Questers, less £1.0m of
interest paid and a net working capital outflow of £1.7m (largely
attributable to the unwinding of deferred income recorded at year-end). The
disposal of Questers resulted in £1.3m of cash being deconsolidated from the
balance sheet, together with a similar amount of current liabilities.
The Group used £4.3m of the Questers proceeds to repay debt, so borrowings
reduced to £20.0m at 30 September 2023, and a further £1.0m was repaid in
November. The Group has comfortably satisfied its banking covenants since they
were reset in June 2023 and our forecasts indicate this headroom will
continue.
Current trading
Like-for-like revenue growth in the month of October 2023 was 42%, continuing
the trend seen in Q2, and again driven by our Consulting business. Margins
were in line with management expectations. Backlog or committed revenue now
represents almost 90% of our full year projected revenues and the pipeline of
potential new business remains encouraging.
Outlook
In the trading update released on 16(th) October 2023, the Board reaffirmed
the FY 2024 targets of 15-20% like-for-like revenue growth and Adjusted EBITDA
margins of 5-6% and this guidance is maintained. These targets would equate to
FY 2024 revenue in the range of £80-85m and Adjusted EBITDA in the range of
£4-5m. We expect revenue growth to be weighted towards Q3 more than Q4 given
the stronger comparative performance in Q4 of last year.
Management are also targeting net debt (excluding lease liabilities) to be in
the range of £11-12m at 31 March 2024 and, therefore, a net debt to Adjusted
EBITDA ratio of <2.5x by the end of the financial year, or shortly
thereafter.
The outlook for FY 2025 is also maintained with like-for-like revenue growth
of 10-15% and further margin improvement of 2-3% on top of that achieved in FY
2024. The contract length of our recent large wins and the ongoing, successful
execution of our strategy provides a solid foundation for our projections,
notwithstanding the possible disruption and uncertainty that may arise from a
general election in the coming year. We believe the fundamental demand for our
skills and services will remain strong for the foreseeable future.
Steve Winters
CFO, TPXimpact
Unaudited interim results for the six months ended 30 September 2023
Consolidated Income Statement
For the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months 6 months to 30 September 2022(1) Year
to 30 September 2023 ended 31
March
2023(1)
Note £'000 £'000 £'000
Revenue 41,622 34,075 69,672
Cost of sales (30,718) (24,734) (50,816)
Gross profit 10,904 9,341 18,856
Administrative expenses (19,937) (13,369) (38,377)
Other income 45 79 492
Operating loss (8,988) (3,949) (19,029)
Finance costs (1,070) (371) (1,084)
Loss before tax from continuing operations (10,058) (4,320) (20,113)
Taxation 874 587 1,494
Loss after tax from continuing operations (9,184) (3,733) (18,619)
Profit after tax from discontinued operations 2,213 1,253 1,061
Net loss (6,971) (2,480) (17,558)
Other comprehensive (loss)/income:
Exchange difference on translation of foreign operations (22) 91 20
Exchange adjustments recycled to the income statement on disposal of 27 - -
discontinued operations
Total comprehensive loss for the period (6,966) (2,389) (17,538)
Earnings per share from continuing and discontinued operations
Basic (p) 8 (7.7p) (2.7p) (19.5p)
Fully diluted (p) 8 (7.7p) (2.7p) (19.5p)
Earnings per share from continuing operations
Basic (p) 8 (10.2p) (4.1p) (20.6p)
Fully diluted (p) 8 (10.2p) (4.1p) (20.6p)
( )
(1) Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in note
Consolidated Statement of Financial Position
At 30 September 2023
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
Note £'000 £'000 £'000
Non-current assets
Goodwill 6 49,085 68,493 59,486
Other intangible assets 19,521 29,041 23,458
Property, plant and equipment 330 544 473
Right of use assets 1,907 1,168 1,438
Other investments 2,188 2,188 2,188
Deferred tax assets 169 54 159
Total non-current assets 73,200 101,488 87,202
Current assets
Trade and other receivables 10,904 14,058 17,812
Contract assets 7,513 2,894 2,999
Corporation tax asset 257 - 335
Cash and cash equivalents 7,171 6,199 6,772
Total current assets 25,845 23,151 27,918
Assets held for sale 731 - -
Total assets 99,776 124,639 115,120
Current liabilities
Trade and other payables (8,658) (6,882) (8,943)
Contract liabilities (977) (2,368) (3,608)
Other taxes and social security costs (2,472) (2,984) (4,073)
Corporate tax liability - (1,077) -
Deferred and contingent consideration - (717) (225)
Lease liabilities (637) (378) (564)
Borrowings - (69) -
Total current liabilities (12,744) (14,475) (17,413)
Liabilities directly associated with assets held for sale (385) - -
Non-current liabilities
Deferred tax liabilities (4,855) (6,769) (5,796)
Borrowings (19,979) (20,270) (24,317)
Lease liabilities (1,396) (881) (909)
Total non-current liabilities (26,230) (27,920) (31,022)
Total liabilities (39,359) (42,395) (48,435)
Net assets 60,417 82,244 66,685
Equity
Share capital 922 912 919
Own shares (983) (688) (983)
Share premium 6,538 6,530 6,538
Merger reserve 73,703 85,095 73,474
Capital redemption reserve 15 15 15
Foreign exchange reserve (67) (1) (72)
Retained earnings (19,711) (9,619) (13,206)
Total equity 60,417 82,244 66,685
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2023
Capital redemption reserve
Share capital Share premium Merger reserve Own shares Foreign exchange reserve Retained earnings
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 919 6,538 73,474 15 (983) (72) (13,206) 66,685
Loss for the period - - - - - - (6,971) (6,971)
Exchange differences on translation of foreign operations
- - - - - (22) - (22)
Exchange adjustments recycled to the income statement on disposal of
discontinued operations
- - - - - 27 - 27
Transactions with owners
Shares issued 3 - 229 - - - - 232
Share-based payments
- - - - - - 466 466
At 30 September 2023 (Unaudited)
922 6,538 73,703 15 (983) (67) (19,711) 60,417
For the year ended 31 March 2023
Capital redemption reserve Foreign exchange reserve Share option reserve
Share capital Share premium Merger reserve Own shares Retained earnings
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2022 874 6,449 78,705 15 (356) (92) 1,089 (8,123) 78,561
Reclassification to retained earnings*
- - - - - - (1,089) 1,089 -
Loss for the period - - - - - - - (2,480) (2,480)
Exchange differences on translation of foreign operations
- - - - - 91 - - 91
Transactions with owners
Shares issued 38 81 6,390 - (81) - - - 6,428
Share-based payments
- - - - - - - (105) (105)
Share options exercised
- - - - (251) - - - (251)
At 30 September 2022 (Unaudited)
912 6,530 85,095 15 (688) (1) - (9,619) 82,244
Loss for the period - - - - - - - (15,078) (15,078)
Transfer to retained earnings - - (12,147) - - - - 12,147 -
Exchange differences on translation of foreign operations
- - - - - (71) - - (71)
Transactions with owners
Shares issued 7 8 526 - (9) - - - 532
Own shares transferred from EBT
- - - - 11 - - (11) -
Dividends paid - - - - - - - (815) (815)
Share-based payments
- - - - - - - 170 170
Own shares purchased by EBT
- - - - (297) - - - (297)
At 31 March 2023 (Audited)
919 6,538 73,474 15 (983) (72) - (13,206) 66,685
*In the year ended 31 March 2023, the share option reserve was reclassified to
form part of retained earnings.
Consolidated Statement of Cash Flows
For the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months to 6 months to 30 September 2022(1) Year ended
30 September 2023(1) 31 March
2023(1)
£'000 £'000 £'000
Cash flows from operating activities:
Loss before taxation on total operations (Note 5) (7,820) (2,990) (18,971)
Adjustments for:
Depreciation 476 359 706
Amortisation of intangible assets 3,918 3,215 6,347
Impairment of goodwill and intangible assets on classification as held for 1,848
sale
- -
Impairment of intangible assets - - 1,770
Impairment of goodwill 5,564 - 9,995
Share-based payments 466 (105) 65
Foreign exchange losses/(gains) 38 (2) (1)
Finance costs (Note 5) 1,081 388 1,105
Loss from fair value movement in contingent consideration 7
148 188
Loss on disposal of property, plant and equipment -
- 6
Gain on sale of discontinued operations (3,774) (1,474) (1,606)
Working capital adjustments:
Decrease in trade and other receivables 358
5,068 1,271
Decrease in trade and other payables (2,067) (5,277) (1,141)
Net cash generated from/(used in) operations 95 (670) (266)
Tax received/(paid) 10 (350) (1,522)
Net operating cash flows 105 (1,020) (1,788)
Cash flows from investing activities:
Net cash paid on acquisition of subsidiaries -
(1,787) (1,969)
Disposal of subsidiaries(2) 6,236 - (127)
Purchase of property, plant and equipment (22) (154) (340)
Additions to intangible assets (82) (269) (244)
Net cash generated from/(used in) investing activities 6,132
(2,210) (2,680)
Cash flows from financing activities:
New borrowings - 2,300 6,300
Repayment of borrowings (4,300) - -
Purchase of own shares - (251) (548)
Payment of lease liabilities (332) (193) (445)
Interest paid (1,015) (380) (1,146)
Dividends paid - - (815)
Net cash (used in)/generated from financing activities (5,647)
1,476 3,346
Net increase/(decrease) in cash and cash equivalents 590
(1,754) (1,122)
Cash and cash equivalents at beginning of the period 6,772
7,914 7,948
Effect of exchange rate fluctuations on cash held (26)
39 (54)
Cash and cash equivalents including cash from discontinued operations 7,336
6,199 6,772
Cash from discontinued operations (165) - -
Cash and cash equivalents at end of the period 7,171 6,199 6,772
Comprising:
Cash at bank and in hand 7,115 6,099 6,717
Cash held by trust 56 100 55
Cash and cash equivalents at end of the period 7,171 6,199 6,772
(1) The cash flows of discontinued operations are immaterial to the
Consolidated Statement of Cash Flows and so have not been presented separately
for the current or previous financial period.
(2) Disposal of subsidiaries comprises cash consideration received of £7.5
million less cash disposed of £1.3 million.
Notes to the Consolidated Financial Statements
1. General information
TPXimpact Holdings plc is a public limited company incorporated in England and
Wales under the Companies Act 2006 with registered number 10533096. The
Company's shares are publicly traded on AIM, part of the London Stock
Exchange.
The address of the registered office is 7 Savoy Court, London, England, WC2R
0EX. The principal activity of the Group is the provision of digitally native
technology services to clients within the commercial, government and
non-government organisation (NGO) sectors.
The interim financial information is unaudited.
2. Basis of preparation
The Group has not applied IAS 34 Interim Financial Reporting, which is not
mandatory for UK AIM listed companies, in the preparation of this half-yearly
report.
The consolidated interim financial information for the six months ended 30
September 2023 does not, therefore, comply with all the requirements of IAS 34
Interim Financial Reporting. The consolidated interim financial information
should be read in conjunction with the annual financial statements of
TPXimpact Holdings plc for the year ended 31 March 2023, which have been
prepared in accordance with applicable UK-adopted international accounting
standards and the AIM rules for Companies.
This consolidated interim financial information does not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2023 were approved by the Board
of directors on and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified and did not contain any statement
under sections 498 (2) or (3) of the Companies Act 2006. The auditor's report
drew attention by way of an emphasis of matter to the high degree of judgement
involved in supporting the carrying value of goodwill and other intangible
assets.
The interim financial statements are presented in pound sterling (GBP), which
is the functional currency of the parent company.
3. Basis of consolidation
These interim consolidated financial statements consolidate those of the
Company and all of its subsidiary undertakings drawn up to 30 September 2023.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control may cease. The financial statements of the
subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies.
4. Accounting policies
The accounting policies used in the preparation of the interim consolidated
financial information for the six months ended 30 September 2023 are in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS) and are consistent with those which were
adopted in the annual statutory financial statements for the year ended 31
March 2023.
5. Discontinued operations
The Group disposed of its subsidiaries Questers Resourcing Limited and
Questers Bulgaria EOOD ("Questers") on 18 September 2023 to Nortal AS
("Nortal") for cash consideration of £7.5 million.
In September 2023 the Group also decided to dispose of its equity interests in
TPXimpact Norway AS to companies controlled by the managing partners of the
business for a nominal consideration of £1. This disposal is considered a
related party transaction and the directors consider, having consulted with
its nominated adviser, that the terms of the transaction were fair and
reasonable insofar as its shareholders are concerned. The associated assets
and liabilities of TPXimpact Norway have been presented as held for sale in
the statement of financial position as at 30 September 2023. The sale was
completed on 13 October 2023.
The operations of both Questers and TPXimpact Norway are presented as
discontinued operations in the income statement with the comparatives and
related notes restated accordingly. The Questers disposal generated a gain of
£3.8 million and a £1.8 million goodwill impairment was recognised on
classification of TPXimpact Norway's assets as held for sale. These are
included in the profit after tax on discontinued operations in the six months
ended 30 September 2023.
Income statement reconciliation:
Continuing Discontinued Total Continuing Discontinued Discontinued Total
operations operations operations operations operations operations operations
H1 2024 H1 2024 H1 2024 H1 2023 H1 2023(1) H1 2023 H1 2023
re-presented(2)
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 41,622 7,171 48,793 34,075 27 6,288 40,390
Cost of sales (30,718) (6,103) (36,821) (24,734) (58) (5,152) (29,944)
Gross profit 10,904 1,068 11,972 9,341 (31) 1,136 10,446
Administrative expenses (19,937) (2,640) (22,577)
(13,369) (109) (1,137) (14,615)
Gain on sale of discontinued operations - 3,774 3,774
- 1,474 - 1,474
Other income 45 47 92 79 - 14 93
Operating (loss)/profit (8,988) 2,249 (6,739)
(3,949) 1,334 13 (2,602)
Finance costs (1,070) (11) (1,081) (371) - (17) (388)
(Loss)/profit before tax (10,058) 2,238 (7,820)
(4,320) 1,334 (4) (2,990)
Taxation 874 (25) 849 587 - (77) 510
(Loss)/profit after tax (9,184) 2,213 (6,971)
(3,733) 1,334 (81) (2,480)
(1) In the six months ended 30 September 2022 discontinued operations
represents Greenshoots Lab Limited ('GSL'), a subsidiary of the Group which
was disposed of in May 2022.
(2) Prior year figures have been re-presented to include Questers and
TPXimpact Norway as discontinued operations.
6. Goodwill
Goodwill decreased by £10.4 million during the six months ended 30 September
2023. This is primarily due to a £5.6 million impairment charge in relation
to Red Cortex, as well as £3.0 million of goodwill disposed in respect of
Questers and a £1.8 million impairment in relation to TPXimpact Norway.
7. Borrowings
At 31 March 2023, the Group had a revolving credit facility with HSBC of £30
million with a £15 million accordion of which £24.5 million had been drawn
down. The Group's financing arrangements require the following covenants to be
met: Net debt to rolling twelve month Adjusted EBITDA of 2.5x or less and
Adjusted EBITDA to interest cover of at least 4.0x, also on a twelve month
rolling basis. The Group received a waiver of these covenants at both 31 March
2023 and 30 June 2023.
For the following four quarters, management and HSBC have agreed a reset of
the Group's lending covenants based on minimum levels of liquidity at each
month end and minimum Adjusted EBITDA levels at each quarter-end. These terms
will apply until the quarter ending 30 September 2024, at which time the
covenants will return to the previous measures. The revised covenants at 30
September 2023 were met.
In September 2023, the Group repaid £4.3 million of the facility leaving
£20.2 million drawn down as at 30 September 2023. A further £1.0 million was
repaid in November 2023.
8. Earnings per share
6 months to 30 September 2023 6 months Year
Number of to 30 September 2022 ended 31 March
shares Number of 2023
shares Number of
shares
'000 '000 '000
Weighted average number of shares for calculating basic earnings per share
90,299 91,426 90,185
Weighted average number of dilutive shares 1,363 990 3,839
Weighted average number of shares for calculating diluted earnings per share
91,662 92,416 94,024
6 months to 30 September 2023 6 months Year ended 31 March 2023(1)
to 30 September 2022(1)
£'000 £'000 £'000
Loss after tax from continuing operations (9,184) (3,733) (18,619)
Profit after tax from discontinued operations 2,213 1,253 1,061
Loss after tax from total operations (6,971) (2,480) (17,558)
Adjusted profit after tax from continuing operations(2) 499 391 875
Earnings per share is calculated as follows:
6 months 6 months Year ended 31 March 2023(1)
to 30 September to 30 September 2022(1)
2023
Basic earnings per share
Basic earnings per share from continuing operations (10.2p) (4.1p) (20.6p)
Basic earnings per share from discontinued operations 2.5p 1.4p 1.1p
Basic earnings per share from total operations (7.7p) (2.7p) (19.5p)
Adjusted basic earnings per share from continuing operations
0.6p 0.4p 1.0p
Diluted earnings per share
Diluted earnings per share from continuing operations(3) (10.2p) (4.1p) (20.6p)
Diluted earnings per share from discontinued operations(3)
2.5p 1.4p 1.1p
Diluted earnings per share from total operations(3) (7.7p) (2.7p) (19.5p)
Adjusted diluted earnings per share from continuing operations
0.5p 0.4p 0.9p
( )
(1) Prior year figures have been re-presented in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, as described in
note 5.
(2) Adjusted profit after tax on continuing operations is defined in note 9.
(3) The weighted average shares used in the basic EPS calculation has also
been used for reported diluted EPS due to the anti-dilutive effect of the
weighted average shares calculated for the reported diluted EPS calculation.
9. Alternative performance measures (unaudited)
In measuring our performance, the financial measures that we use include those
which have been derived from our reported results in order to eliminate
factors which distort period-on-period comparisons. These are considered
non-GAAP financial measures, and include measures such as like-for-like
revenue, adjusted EBITDA and net debt. We believe this information, along with
comparable GAAP measurements, is useful to shareholders and analysts in
providing a basis for measuring our financial performance.
Like-for-like
Like-for-like comparisons are calculated by comparing current year results for
continuing operations (which includes acquisitions from the relevant date of
completion) to prior year results, adjusted to include the results of
acquisitions for the commensurate period in the prior year. In the six months
ended 30 September 2023, there were no differences in the like-for-like and
reported comparisons due to there being no acquisitions in either period.
Reconciliation of net debt (excluding lease liabilities):
30 September 30 September
2023 2022 31 March
2023
£'000 £'000 £'000
Cash and cash equivalents 7,171 6,199 6,772
Borrowings due within one year - (69) -
Borrowings due after one year (19,979) (20,270) (24,317)
Net debt (12,808) (14,140) (17,545)
Reconciliation of operating loss to adjusted EBITDA:
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022(1) 2023(1)
£'000 £'000 £'000
Operating loss (8,988) (3,949) (19,029)
Amortisation of intangible assets 3,894 3,101 6,155
Depreciation 334 139 371
Loss from fair value movement in contingent consideration 7 148 188
Impairment of intangible assets - - 1,770
Impairment of goodwill 5,564 - 9,995
Share-based payments 501 (82) 84
Costs directly attributable to business combinations - 167 229
Costs related to business restructuring 674 1,345 2,541
Adjusted EBITDA 1,986 869 2,304
(1) Prior period figures have been re-presented in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, as described in
note 5.
Reconciliation of loss before tax to adjusted profit after tax:
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022(1) 2023(1)
£'000 £'000 £'000
Loss before tax from continuing operations (10,058) (4,320) (20,113)
Amortisation of intangible assets 3,894 3,101 6,155
Loss from fair value movement in contingent consideration 7 148 188
Impairment of intangible assets - - 1,770
Impairment of goodwill 5,564 - 9,995
Share-based payments 501 (82) 84
Costs directly attributable to business combinations - 167 229
Costs related to business restructuring 674 1,345 2,541
Adjusted profit before tax from continuing operations 582 359 849
Tax (excluding impact of amortisation of intangible assets) (83) 32 26
Adjusted profit after tax from continuing operations 499 391 875
(1) Prior year figures have been re-presented in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, as described in
note 5.
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