REG - TPXimpact Holdings - Preliminary Results
06/07/2023 07:00
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RNS Number : 1192F TPXimpact Holdings PLC 06 July 2023
6 July 2023
TPXimpact Holdings PLC
("TPXimpact", "TPX" or the "Company")
Unaudited preliminary results for the year ended 31 March 2023
Results in line with the trading update made on 30 January 2023;
FY24 outlook unchanged
TPXimpact Holdings PLC (AIM: TPX), the technology-enabled services company
focused on people-powered transformation, announces its unaudited preliminary
results for the year ended 31 March 2023.
FY23 Financial highlights:
● Performance in line with market consensus(1)
● Strong momentum in new orders with £115m won in the year, including £36m in
Q4
● Revenue up 5.0% to £83.7m (2022: £79.7m)
● Like-for-like revenue trends notably better in Q4 (-1.6%), with momentum
continuing into FY24 (+5% in first two months). FY23 like-for-like revenues
declined by 7.2%
● Adjusted EBITDA(2) of £2.5m (2022: £12.2m)
● Adjusted EBITDA margin of 3.0% (2022: 15.3%)
● Reported operating loss of £(19.4)m (2022: operating profit of £3.2m), after
including £11.8m (2022: £Nil) non-cash impairment charge for
goodwill/intangible assets
● Adjusted profit before tax on continuing operations of £0.7m (2022: £10.9m)
● Reported loss before tax on continuing operations of £(20.5)m (2022: profit
before tax of £2.5m)
● Adjusted diluted earnings(2) per share from continuing operations of 0.7p
(2022: 11.3p)
● Reported diluted loss per share from continuing operations of (21.1)p (2022:
diluted earnings per share of 0.9p)
● Net debt(1) as at 31 March 2023 of £17.5m (31 March 2022: £10.1m)
● New banking arrangements agreed, providing a solid foundation for future goals
Operational and Impact highlights:
● New strategy, vision and branding launched as "People Powered Transformation"
● 72% of FY23 revenues from public services (2022: 72%)
● Staff retention rates showing marked improvement to current annualised
run-rate of 84%
● Hub strategy enhanced with three new leases signed, including a single London
office
● Integration of Peak Indicators and Swirrl acquisitions into a new Data &
Insights Division
● Articles of Association amended so that our constitution now requires the
Directors to consider the interests of all stakeholders in the Company, to
support our journey to B-Corp certification
● Became a founding customer of CO2.com and have offset our entire historic
carbon liability
Post-period trading and outlook:
● Trading for the first two months of FY24 in line with management expectations,
with like-for-like revenue growth of over 5%
● Over £90m of new orders won in Q124 (including up to £49m four-year contract
with His Majesty's Land Registry (HMLR) and up to £27.5m two-year contract
with Department for Education)
● Over £80m of FY24 revenues are represented by committed (backlog) spend
● Net debt(1) at 31 May 2023 of £16.8m
● FY24 outlook unchanged with like-for-like revenue growth of 15-20% and
Adjusted EBITDA margins of 5-6%
● Our three-year plan targets an Adjusted EBITDA margin of 10-12% in FY26
( )
(1) Consensus figures for FY23: Revenue £83m, Adjusted EBITDA £2.5m(
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 7.
Bjorn Conway, Chief Executive Officer, commented:
"After a challenging year, TPXimpact has developed a clear strategy and a
comprehensive three-year plan to leverage its strong foundations of successful
client delivery and new business wins.
The start of FY23 marked the initiation of an internal change program aimed at
achieving robust top-line growth in the medium to long term, through the
consolidation of component businesses under a unified brand.
However, the change program faced challenges, and there were market
disturbances due to national events and an uncertain political landscape,
leading to revised market forecasts throughout the year. Despite these
obstacles, I am pleased to report that the business met the revised forecast,
with a robust order backlog exceeding £80m into FY24.
This achievement, driven by the exceptional performance of our business unit
management teams, provides a solid foundation for improved business
performance in FY24 and beyond. Since joining in October 2022, I have been
impressed by the capability, passion, and commitment of our teams, as well as
their positive impact on clients' organisations. It underscores the immense
potential within TPXimpact to deliver value, foster entrepreneurialism, and
achieve long-term growth while maintaining a sense of purpose."
TPXimpact will be hosting a webinar for analysts at 9:30am today. If you would
like to register for the analyst webinar, please contact tpx@almapr.co.uk
(mailto:tpx@almapr.co.uk) .
The Group will also be hosting a webinar for retail investors at 1:00pm today.
Retail investors can register for the webinar using the following link:
https://bit.ly/TPX_FY23_webinar (https://bit.ly/TPX_FY23_webinar)
Enquiries:
TPXimpact Holdings
Bjorn Conway, CEO Via Alma PR
Steve Winters, CFO
Stifel Nicolaus Europe Limited
(Nomad and Joint Broker) +44 (0) 207 710 7600
Alex Price
Fred Walsh
Ben Burnett
Dowgate Capital Limited +44 (0) 203 903 7715
(Joint Broker)
James Serjeant
David Poutney
Alma PR tpx@almapr.co.uk
(Financial PR) +44 (0) 203 405 0209
Josh Royston
Kieran Breheny
Matthew Young
About TPXimpact
We believe in a world enriched by people-powered digital transformation.
Working together in close collaboration, we want to help our clients reimagine
their organisations, services and experiences to accelerate positive change
and build a future where people, places and the planet are supported to
thrive.
Led by passionate people, we care deeply about the work we do and the impact
we have in the world. Working alongside our clients teams, we work to
understand their unique challenges and find new ways forward together;
challenging assumptions, testing new approaches and building capabilities,
leaving them with the tools, the insight and the confidence to continue
iterating and innovating.
Combining rich heritage and expertise in human-centred design, data,
experience and technology, we bring over 15 years experience across the
public, private and third sectors, creating sustainable solutions with the
flexibility to learn, evolve and change.
The business is being increasingly recognised as a leading alternative digital
transformation provider to the UK public services sector, with c.72% of its
client base representing the public sector and c.28% representing the
commercial sector.
More information is available at www.tpximpact.com.
Chairman's statement
Overview
FY23 has been a year of considerable change for TPXimpact in which the Group
faced a combination of market issues and significant operational challenges as
part of its integration project. The Board introduced a new management team in
Björn Conway as Chief Executive Officer and Steve Winters as Chief Financial
Officer to continue the good work of our co-founders, Neal Gandhi and Oliver
Rigby.
I would like to reiterate my thanks to Neal and Olly for the exceptional
leadership they showed in setting out their vision for TPXimpact to achieve
its full potential through brand consolidation, and for their recognition in
stepping down that a different type of leadership was required to take the
Group forward.
Since my update on the HY23 interim results in November 2022, the focus for
the Group has been navigating these internal operational challenges as we
continue our process of consolidating under one brand. Nevertheless,
TPXimpact's core go-to-market proposition is unchanged, with our teams
continuing to deliver innovative end-to-end digital transformation across our
four divisions: Consultancy, Digital Experience (DX), Data & Insight and
International.
I am delighted with the way Björn and Steve have quickly embedded themselves
within the heart of the organisation and have set about identifying those
processes to help optimise our transition to one brand, as well as engaging
with our teams across the Group. Following a tough first half which was
significantly impacted by the scale of our consolidation project, and with
trading below expectations into Q3, we were pleased to deliver a Q4
performance above our revised expectations, including a record number of new
business wins and the signature of two significant contracts with two central
government departments.
The Group continues to improve the efficiency of communication between our
teams and systems. The Board remains convinced that this strategy to bring
together our Group businesses under one unified brand is the correct and
necessary decision, enabling TPXimpact to optimise its efficiency and support
long-term and scalable growth.
It has been a particularly challenging year for the Group, and I would like to
thank all our stakeholders - from our customers, our valued employees, and our
shareholders - for their continued support throughout the year.
Market dynamics
Through its strong relationships across multiple sectors and extensive
expertise in digital transformation services, TPXimpact is well-positioned in
an attractive and rapidly expanding market.
More than ever across the public sector there is a need for organisations of
all sizes to communicate more effectively and achieve efficiency savings.
Across this complex and vast landscape, digital transformation services are
poised to replace heritage and legacy systems. Equally, for those
organisations in the commercial sector, there remains an ongoing need to drive
efficiencies and maintain a competitive edge over their peers. The Group will
seek to maintain a healthily diversified balance of work across Central
Government, Local Government, Health, Charitable and Commercial sectors.
Our purpose
Despite the considerable change the Group has undergone operationally, at its
core TPXimpact remains a purpose-led organisation committed to delivering a
net benefit to the people, places and wider planet in which we operate. This
sense of purpose is reflected in the values of the Group and through our
colleagues, who care deeply about the need to accelerate positive change
across society.
As part of our vision to support the next generation of talent, we are pleased
to continue working with our fantastic charity partners; Apps for Good,
Arkwright Scholars, In2Science and Telerik Academy. Each of these
partnerships, alongside our own flagship Future Leaders programme have been
supporting young people from diverse and underrepresented backgrounds to
obtain the skills and support they need to be successful in the tech industry.
This year our programmes reached over 870 beneficiaries.
Corporate governance
Throughout the challenges of FY23 we have maintained continuity as a Board.
Neal Gandhi, founder and former CEO, joined the Board in a non-executive
capacity and Oliver Rigby, founder and former CFO, provided transitional
support and continues to support the ESG committee.
The Board of TPXimpact is committed to enhancing the governance of the
organisation on an ongoing basis. We diligently monitor market conditions and
regularly evaluate the key risks that affect the Group, while being mindful of
the broader challenges faced by our end markets and stakeholders.
We deeply appreciate the trust and support of our shareholders, as we strive
to create long-term value for them through purpose-driven initiatives.
Ensuring that our shareholders are well-informed and actively involved is of
utmost importance to us. Therefore, we prioritise regular updates and aim to
enhance transparency in all our corporate communications.
People
The collective effort and commitment of all our colleagues throughout the year
has been instrumental in navigating the challenges we faced, and I extend my
gratitude to every member of our team for their support.
The new vision and strategy for the business has helped to re-engage employees
and we are pleased to see the emphasis that the new management team has placed
on open and transparent communication. The wider organisation has crowdsourced
a new set of values to guide decision-making and behaviours in a more
integrated Group.
Employee retention improved throughout FY23. The 12 month run-rate based on
Q423 was c.84% and this improvement has continued into Q124. We are pleased to
see the positive response and level of applicants for the new roles we have
created within TPXimpact as the business grows to deliver the significant new
contracts won in the latter part of FY23 and post-period.
We are pleased to report that our continued focus on D&I has seen
progression during the period with our minority representation at a senior
level increasing from 8% to 11%. We are pleased with the progress made and
will continue to make TPXimpact a diverse and inclusive workplace for all
employees.
Alongside the enhancement of diversity and inclusion in senior representation,
we have achieved a reduction in both our gender pay gap and median ethnicity
pay gap over the past year. Although there is more progress to be made in
closing these gaps, our mean gender gap currently stands at 15%, aligning
closely with the UK average for all employees in 2022 (14.9%).
We track employee satisfaction through regular pulse surveys and promptly
address any areas for improvement.
Looking ahead
We are seeing the benefits of our broadened range of services coming through,
enabling us to capitalise on the significant market opportunity available as
the ongoing investment in digital transformation across both the public and
commercial sectors continues.
Increased demand for our services is already being seen through the record
post-period contract wins with the Department for Education and His Majesty's
Land Registry, highlighting the value placed in our offering and the
opportunity available as we increase efficiencies and operate as a unified
brand.
As we continue to progress against our strategy, we are confident that we have
the right team in place to achieve sustainable growth in an expanding market
and build on the momentum seen so far in FY24.
Mark Smith
Chairman, TPXimpact
CEO Statement
After a challenging year, the Group now has a clear strategy and three-year
plan to build on the already strong foundations of successful client delivery
and new business wins
TPXimpact started FY23 with a plan to achieve strong top-line growth in the
medium to long-term through an internal change programme to unify its
component businesses under a single brand.
As reported in the September 2022 trading update, several challenges became
evident as the change programme proceeded and our markets were disturbed by
national events and an uncertain political landscape. As a result, our
forecasts for the full year were revised. These forecasts were revised again
in January 2023.
I am pleased to report that the business achieved the revised forecast with a
strong order backlog of over £80m into FY24. This was on the back of a good
Q4 performance by the business unit management teams and is a strong basis on
which to build improved business performance in FY24 and beyond.
The teams at TPXimpact deliver amazing work for our clients, despite the
business itself still requiring significant investment and development to
better support our teams as they deliver good, predictable, outcomes for our
stakeholders. The key challenge is to improve revenue conversion through to
profit.
We have established a three-year strategy and plan to enhance appropriate
governance, processes, systems, and inspiring leadership at all levels within
the business to improve ways of working and, therefore, efficiency and
profitability.
I am pleased with the progress the Group has made to date. We remain confident
in the medium to long-term prospects for TPXimpact as we continue to
appropriately integrate and streamline our businesses to deliver our services
more efficiently to our clients - the organisations that underpin our society
- and deliver sustainable change and tangible positive impact.
Demand for TPXimpact's differentiated service offering brings strong future
growth opportunities
The market for TPXimpact's services and differentiated proposition remains
strong. In combination with a more stable internal environment for our teams,
this resulted in £115m of new business wins in FY23 and a good start to FY24
with over £90m of new business wins in the first quarter.
Operating under a single brand, TPXimpact has the scale to assist clients with
large and strategically important programmes as well as offering the intimacy
and adaptability to work alongside clients to improve their engagement with
citizens, customers, and donors. We work right across the spectrum from early
community and customer engagement, through service design and into delivery,
and have the expertise and capability to deliver hybrid cloud solutions and
support complex legacy platforms alongside our sector rich consulting
capabilities.
In Central Government, we continue to see a substantial shift towards digital
transformation to streamline and optimise service experiences and leverage
Government data. Combined with the increasing use of Digital Marketplace
frameworks enabling TPXimpact to compete directly with traditional large-scale
suppliers this provides a growing market for our valuable services. The
potential of our Central Government business and increasing client confidence
in TPXimpact is evidenced by the growing scale of our contract wins, from low
single digit millions at the start of FY23, to multi-year and tens of millions
at the beginning of FY24.
Our Local Government clients look to TPXimpact to help them be future-ready
and sustainable - whether that is accelerating the adoption of technology and
digital solutions, addressing net zero targets, or improving financial
resilience by helping to re-think long-term planning approaches, identify
savings and develop flexible delivery models. Our work is led by data and
insight and we are pro-active in collaborating to tackle the most complex
client challenges. We have invested in our local Government client facing
teams to improve access to our services and support growth.
In Health and Social Care, FY23 was dominated by the merger of NHS Digital,
NHSx and Health Education England into NHS England. This diverted attention
from delivery and in conjunction with increased scrutiny of the move towards
Integrated Care Systems (ICSs) reduced the opportunities available for us to
assist our clients. We used this period to diversify our business into
frontline trusts and bring a wider range of capabilities to bear from across
TPXimpact to support a more design-led approach to service transformation - a
core, distinctive capability for TPXimpact. We see Health and Social Care as
an exciting growth area over the next few years.
Our work with NHS Wales, delivered though our Red Cortex business, continued
to be very strong during FY23 due to our long track record and deep
relationships. We won additional contracts and a place on a new digital
transformation framework as TPXimpact. We have seen some softness in spend at
the start of FY24 but expect normal spending patterns to resume in the second
half of the year.
In our Commercial sector, we see clients continue to prioritise operational
efficiencies leading to a rise in demand for hybrid cloud solutions and a
growing interest in Artificial Intelligence (AI) driven by media coverage of
tools like ChatGPT. In FY23, we experienced strong demand from existing
clients to develop solutions for resilient, scalable, and secure cloud
architectures and for business intelligence expertise to enable them to make
the best use of their data. As we move into FY24, we are bolstering our
commercial client teams as we look to deploy our experience and expertise with
new clients.
Our fundraising, not for profit, and membership and visits clients are the
cornerstone of our Digital Experience (Dx) business. FY23 saw charities face
challenging economic times with their audiences feeling the impact of
cost-of-living pressures and a reduction in donor numbers. TPXimpact supports
our clients to provide exceptional experiences and utilises insights from data
to inform audience needs and behaviours to optimise engagement. Similarly in
the memberships and visits sector, member engagement and meaningful
connections help organisations differentiate themselves, and our deep
understanding of their member communities and needs, enables us to co-develop
engaging on-line experiences supported by our digital tools.
Strong delivery and growing client confidence across our customer sectors is
evidenced by increased engagement sizes and backlog.
We aim to provide tailored, insight and craft led, high-value work with, and
for, our clients at a fair price that balances our desire to deliver
purposeful work within a commercially sustainable business model.
Our new strategy underpins our continuing client success and will simplify and
improve the business
Our vision of the future is of a world enriched by what we call "people
powered digital transformation" where, with our help, organisations improve
lives in an equitable and responsible way.
The main strategic effort is to provide our already successful client-facing
teams with efficient and effective support by removing points of friction in
our business and improving our conversion of revenue to EBITDA. Our aim is
to achieve 10-12% Adjusted EBITDA margins within 3 years.
Working effectively across its business units, TPXimpact draws together a
unique blend of specialist capabilities to help clients transform and harness
the best of digital technologies. This approach and the teams and capabilities
that lie behind it are very much in demand with clients seeking better ways to
engage with their customers, and to do so in a more cost-effective way.
The Change programme of early 2022 and subsequent Peak and Swirrl acquisitions
has left the business operating through 7 units:
● The Consulting business unit
● The Dx (Digital Experience) business unit,
● The Data & Insights business unit, formed of the recently
acquired Peak and Swirrl businesses
● Red Cortex
● KITS (Keep IT Simple)
● Questers
● TPXimpact Norway
Integration within business units was partially complete at the end of H1 FY23
and much of the work of the last few months has been bringing teams within
these business units together.
During the latter part of FY23 we undertook a number of initiatives to improve
the business:
● implemented formal performance reporting and reviews underpinned by budgets
and business plans owned by Group businesses
● improved the forward looking data and information available to business
leaders from our existing systems
● established an Operational Board to coordinate change and improve underlying
processes and systems
● recruited a new Chief People Officer at the end of Q3 to improve recruitment,
ensure our team member proposition is strong, equitable, and aligned with our
values, and reinvigorate our Employee Representative Groups
● increased employee engagement through greater transparency and access to
senior management. As CEO, I communicate to staff most weeks through a short
video and members of the senior leadership team chair our Employee Forum by
rotation
● identified a new London HQ building to co-locate our teams and rationalise our
footprint. We also improved our Chesterfield and Manchester hub facilities
● commenced a market based pay project to start to tackle inequalities inherent
in a business formed of many acquisitions.
To achieve our vision and improve business operations we have developed a
three-year plan:
Year 1: focus and balance - establish the Consulting business as a scalable
platform and complete the integration of three smaller agencies as the Digital
Experience business.
Year 2: form and integrate - bring the Data & Insights, Red Cortex and
KITS businesses onto the Consulting platform as an integrated Digital
Transformation business.
Year 3: grow and differentiate - as a simpler, more coherent, and
operationally mature business, accelerate our growth and purpose-led
differentiation.
This staged approach is designed to further unify the unique capabilities of
TPXimpact under a single brand, increase efficiencies, and capitalise on the
increasing market opportunity. It also enables TPXimpact to become a platform
for future growth options, both organic and through acquisition.
As we move through the latter part of FY24 and into FY25, and the work to
simplify and improve the business progresses, we expect the Group to deliver
stronger and more predictable performance.
Underpinning our vision and strategy we have developed a set of values that
help guide all team members in the decisions they make day-to-day with clients
and colleagues. The way our values show up in our work was crowdsourced from
TPXimpact team members and collectively are our 'PACT':
Purpose - positive change with measurable impact
Accountability - self organisation and accountability
Craft - bringing our best capabilities to bear through a shared vision of
excellence.
Togetherness - long lasting relationships built on honesty, openness, and
trust.
Our purpose in action (ESG)
TPXimpact has been formed on a solid foundation of shared values. Our people,
our clients and our investors are attracted to us because of this commitment
to social responsibility. Our shared belief that the business that we are
building is a good one, that will positively impact all stakeholders, has been
invaluable through a challenging period of change.
This year we have seen a huge acceleration in Social Value commitments being
embedded into our client contracts, bringing our commercial and ESG work
closer than ever before. A key tenet of our work over the next year is better
integration and balancing our purpose with commercial outcomes.
We continue to set ambitious targets that ensure our business operations are
positively impacting all stakeholders; investing in innovative carbon
measurement, reduction and removal programmes, ensuring that we are inclusive
by design at every stage of the employee lifecycle and supporting our
communities where possible with time, skills, funding and opportunities. We
fulfilled our commitments to fully offset our historical CO2 emissions, ran a
successful Future Leaders programme and donated over 2,500 hours through
volunteering programmes.
This year, as we prepare for B Corp certification, we have formalised our
commitment to all stakeholders by amending our legal Articles of Association.
These now enshrine our purpose-led approach into the legal structure of the
business. As ever, we are committed to complete transparency when it comes
to our ESG performance and we have made excellent progress this year across
People, Planet and Places.
Future opportunities
Our current trading performance is encouraging, but there is still work to do
to improve margin conversion and predictability.
As we progress against our strategy and improve the operational structure of
the Company, we are putting in place the necessary measures to ensure
TPXimpact will see growth driven by increasing demand for our services within
the market. I am proud of how our people have faced the challenges during the
period and I have every confidence that we are developing a strong team to
achieve sustainable growth in the future.
Investment in digital transformation is continuing to grow at pace in the
public and commercial sectors and it has become clear that this is now a
necessity for all modern businesses. TPX has the right portfolio of service
offerings to capitalise on the growing market demand for digital
transformation and we have confidence in the prospects for the Group moving
forward.
Post-period we were pleased to announce two digital transformation contracts
with the Department for Education and His Majesty's Land Registry that will
deliver a cumulative value of up to £77 million over a four-year period. The
successful execution of these contracts, which reflect the capabilities we now
possess through our consolidated service offering, represent the increasing
momentum for the Group as we take on larger contracts and give the Board
confidence in the Group's medium to long term prospects.
Through our vision of a 'world empowered by digital transformation' and our
strategy to simplify, streamline, and balance our purpose and commercial
outcomes, we will build a scalable, coherent and differentiated business
capable of sustaining 10-15% CAGR revenue growth and 10-12% Adjusted EBITDA
margin whilst delivering great outcomes for our clients, people, places and
the planet.
Bjorn Conway
CEO, TPXimpact
Financial review
Prior period comparatives have been restated to exclude the results of
Greenshoot Labs Limited, which was disposed of in May 2022.
Reported revenues were up 5.0% to £83.7m, reflecting the contribution of
acquisitions, including Peak Indicators Limited and Swirrl IT Limited both of
which completed in April 2022 (and which are now fully integrated into a new
Data & Insights division), and RedCortex Limited which completed in
December 2021. The performance of these businesses was very encouraging, with
combined like-for-like revenue growth of almost 30% in the year.
Group revenues were, however, down 7.2% on a like-for-like basis. A number of
factors contributed to this performance, including a lower-than-normal order
book in certain parts of the business as they entered the financial year and
client delays in implementing projects, which especially impacted Q2 and Q3.
Sequentially, like-for-like revenue fell by 1.6% in Q1, 11.2% in Q2, 14.6% in
Q3 and 1.6% in Q4.
New business wins showed increasing momentum in the second half of the year
with £41m in Q3 and £36m in Q4, and £115m in total for the year. Since
year-end, this encouraging trend has accelerated even further, with new orders
in the first quarter of FY24 of over £90m, largely due to two significant
wins: up to £49m with His Majesty's Land Registry (HMLR) over four years and
up to £27.5m with the Department for Education over two years, both of which
commenced in May 2023. These wins demonstrate the value our increasing scale
can offer our clients, especially in the key strategic sector of Central
Government.
Public sector clients represented 72% of revenue in the year ended 31 March
2023 and our top 10 clients represented 39% of revenue compared to 42% last
year.
Gross profit of £20.9m was down 14.3% from £24.4m on a reported basis and
down over 27% on a like-for-like basis. Cost of sales was £62.8m, an increase
of 13.6% on a reported basis and 2.4% on a like-for-like basis, again
reflecting the impact of acquisitions. Gross margins therefore reduced to
25.0% from 30.6% last year, and from 32.0% on a like-for-like basis.
The Group continually assesses the appropriate mix of permanent headcount and
contractors within cost of sales, with a view to optimising efficiency in
servicing the needs of our clients. In the first half of the year, however,
this efficiency was more challenging to achieve due to client delays in
implementing projects, which impacted utilisation rates, particularly in our
Consulting division (40% of Group revenues). In view of the level of new
business won in the second half of the year, Consulting has embarked on a
major recruitment campaign to expand permanent staff resource, although the
full benefit of this will not come through until FY24.
A new benefits package for permanent staff was introduced in April 2022, which
included increases in holiday entitlements, pensions and other benefits. These
enhanced benefits, together with the effect of salary reviews in March 2022,
impacted gross margins. Nevertheless, management remain committed to offering
our staff a highly attractive benefits package as one of a number of measures
to attract and retain talent, and differentiate TPXimpact as an employer which
truly values the contribution and well-being of our staff.
Utilisation rates improved markedly in Q4 and we are targeting continued
improvement in FY24 and beyond. The turn-around in Q4 was entirely
attributable to the tenacity and commitment of our people who are devoted to
delivering meaningful insight and value to our clients. The healthy order
book, combined with higher utilisation rates and capacity, should lead to
improved gross margins in FY24. We are also seeing signs of improved staff
retention rates over the last six months, particularly in Consulting, our
largest business.
On a reported basis, the Group made an operating loss of £(19.4)m compared
with an operating profit of £3.2m last year. This reflects the £3.5m
reduction in gross profit explained above, as well as the effect of
administrative costs increasing to £40.8m from £21.7m last year.
Administrative costs include £11.8m (2022: £Nil) of non-cash impairment
charges in relation to goodwill and intangible assets recognised on past
acquisitions, due to management's reassessment of the likely future
performance of certain businesses in the Group.
Staff costs included in administrative costs increased to £12.6m (2022:
£9.0m), reflecting the acquisitions of Peak Indicators and Swirrl IT, as well
as a continued investment in talent to support the needs of the business going
forwards. On a like-for-like basis, total Group headcount of 798 (on an FTE
basis) at 31 March 2023 compares with 659 people at 31 March 2022, an increase
of 21.1%. Including contractors, the Group's aggregate workforce is currently
approximately 1,100 people.
Administrative costs also include £2.5m of restructuring costs (2022: £1.8m)
arising from integration and restructuring actions aimed at improving the
long-term health and efficiency of the business and £7.1m (2022: £5.9m) of
depreciation and amortisation charges, primarily in relation to acquired
intangible assets, previously recognised on acquisitions.
Adjusted EBITDA of £2.5m compares with £12.2m last year, representing a
margin of 3.0% against 15.3%. A reconciliation of Operating (loss)/profit to
Adjusted EBITDA is provided in Note 7 to the unaudited preliminary results.
The Group made a reported loss before tax on continuing operations of
£(20.5)m in the year (2022: profit of £2.5m), and an adjusted profit before
tax on continuing operations of £0.7m (2022: £10.9m). Finance costs were
£1.1m in the year (2022: £0.7m), reflecting both higher net debt and
increased interest rates.
Corporation tax amounted to a credit of £1.5m (2022: charge of £1.7m) due to
the decrease in profitability of the Group. Adjusted profit after tax on
continuing operations was £0.6m (2022: £10.0m).
The disposal of Greenshoot Labs gave rise to a gain on disposal of £1.6m
which has been included in the income statement within income from
discontinued operations.
Reported diluted earnings per share from continuing operations for the year
was a loss of (21.1) pence per share (2022: earnings of 0.9 pence per share),
reflecting the decrease in profitability in the year. On an adjusted basis,
diluted earnings per share on continuing operations was 0.7 pence per share
(2022: 11.3 pence per share).
During the year, the Board declared an interim dividend of 0.3 pence per share
(2022: 0.3 pence per share), which was paid on 27 January 2023. In view of the
Group's financial performance in the second half of the year, no final
dividend will be declared or paid (2022: 0.6 pence per share). Therefore,
total dividends declared and paid in respect of the year ended 31 March 2023
were 0.3 pence per share (2022: 0.9 pence per share). The Board is keen to
reinstate a dividend when appropriate and will continue to keep dividend
policy under review.
Cash flow and Net Debt
Net debt (excluding lease liabilities) at 31 March 2023 was £17.5m compared
with £10.1m at 31 March 2022. The increase in net debt in the year of £7.4m
includes £2.0m cash paid for acquisitions (net of cash acquired), £1.5m of
corporate taxes paid, £1.1m of interest costs paid, £0.8m of dividends paid,
£0.6m of capital expenditure (including intangible assets) and £0.5m of
share repurchases into the Group's EBT. Working capital improved slightly year
on year.
The Company secured a waiver of its lending covenants from its bankers at 31
March 2023 and agreed a further waiver at 30 June 2023. Amended covenants
(based on minimum liquidity and Adjusted EBITDA levels) will apply until the
quarter ending 30 September 2024, at which time the original leverage metrics
will be reinstated (Net debt to Adjusted EBITDA of 2.5x and Adjusted EBITDA to
interest cover at 4.0x). These new lending arrangements provide renewed
stability and a sound basis for the business to reach its performance goals.
Current trading
For the first two months of FY24, trading was in line with management
expectations, with like-for-like revenue growth of over 5%. With new business
wins of over £90m in the first quarter, we are seeing increased momentum in
new orders and are well-positioned for top-line growth in both the short and
long term. At the same time, management are very aware of the need to convert
top-line growth into meaningful margin improvement and have initiated a number
of measures focussed on efficiency, cost control and profitability.
Net debt (excluding lease liabilities) was £16.8m at 31 May 2023, a £0.7m
decrease on 31 March 2023, largely due to a continued focus on working capital
management. The last remaining earnout liability in respect of historical
acquisitions was settled in shares on 6 June 2023.
Outlook
There is no change to the Group's previously published targets for the year
ending 31 March 2024, with like-for-like revenue growth of 15-20% and an
Adjusted EBITDA margin of 5-6%, with margin improvement expected to be
weighted to the second half of the year. Committed (or backlog) revenues in
relation to the current financial year are over £80 million, significantly
higher than at the same time last year.
With respect to FY25, management continue to target like-for-like revenue
growth of 10-15% and a further improvement in Adjusted EBITDA margin of 2-3%
on top of that targeted for FY24. Based on our three-year plan, we are
targeting an Adjusted EBITDA margin of 10-12% in FY26.
TPXimpact has entered the new financial year with renewed vigour, whilst
recognising there is scope to improve our operational processes to enhance
profitability, and respond positively to a challenging wider economic
environment. We continue to believe the digital transformation market in the
UK - in both the public and private sectors - remains attractive, with plenty
of potential for continued growth, and that the Group is well-placed to take
advantage of these trends.
Steve Winters
CFO, TPXimpact
Consolidated Income Statement
For the year ended 31 March 2023
Unaudited Audited
2023 2022
£'000 £'000
Revenue 83,680 79,709
Cost of sales (62,775) (55,341)
Gross profit 20,905 24,368
Administrative expenses (40,789) (21,738)
Other income 519 579
Operating (loss)/profit (19,365) 3,209
Finance costs (1,105) (683)
(Loss)/profit before tax from continuing operations (20,470) 2,526
Taxation 1,467 (1,706)
(Loss)/profit after tax from continuing operations (19,003) 820
Profit/(loss) after tax from discontinued operations 1,445 (723)
Net (loss)/profit (17,558) 97
Other comprehensive income/(loss):
Exchange difference on translation of foreign operations 20 (226)
Total comprehensive loss for the period (17,538) (129)
Earnings per share from continuing and discontinued operations
Basic (p) (19.5p) 0.2p
Fully diluted (p) (19.5p) 0.1p
Earnings per share from continuing operations
Basic (p) (21.1p) 1.0p
Fully diluted (p) (21.1p) 0.9p
Consolidated Statement of Financial Position
At 31 March 2023
Unaudited Audited
2023 2022
£'000 £'000
Non-current assets
Goodwill 59,486 66,157
Intangible assets 23,458 28,493
Property, plant and equipment 473 297
Right of use assets 1,438 1,293
Other investments 2,188 -
Deferred tax assets 159 47
Total non-current assets 87,202 96,287
Current assets
Trade and other receivables 17,812 16,924
Contract assets 2,999 3,840
Corporate tax asset 335 -
Cash and cash equivalents 6,772 7,914
Total current assets 27,918 28,678
Assets held for sale - 708
Total assets 115,120 125,673
Current liabilities
Trade and other payables (8,943) (7,718)
Contract liabilities (3,608) (4,536)
Other taxes and social security costs (4,073) (4,160)
Corporate tax liability - (1,214)
Deferred and contingent consideration (225) (3,173)
Lease liabilities (564) (416)
Borrowings - (20)
Total current liabilities (17,413) (21,237)
Liabilities directly associated with assets held for sale - (103)
Non-current liabilities
Deferred tax liabilities (5,796) (6,696)
Deferred and contingent consideration - (198)
Borrowings (24,317) (18,000)
Lease liabilities (909) (878)
Total non-current liabilities (31,022) (25,772)
Total liabilities (48,435) (47,112)
Net assets 66,685 78,561
Equity
Share capital 919 874
Own shares (983) (356)
Share premium 6,538 6,449
Merger reserve 85,621 78,705
Capital redemption reserve 15 15
Foreign exchange reserve (72) (92)
Retained earnings(1) (25,353) (7,034)
Total equity 66,685 78,561
(1) Prior year figures have been re-presented to include the share option
reserve as part of retained earnings.
Consolidated Statement of Changes in Equity
For the year ended 31 March 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 2022 874 6,449 78,705 15 (356) (92) (7,034) 78,561
Loss for the year - - - - - - (17,558) (17,558)
Exchange differences on translation of foreign operations
- - - - - 20 - 20
Transactions with owners
Shares issued 45 89 6,916 - (90) - - 6,960
Share utilisations - - - - 11 - (11) -
Dividends paid - - - - - - (815) (815)
Share-based payments - - - - - - 65 65
Own shares purchased by EBT
- - - - (548) - - (548)
At 31 March 2023 (Unaudited)
919 6,538 85,621 15 (983) (72) (25,353) 66,685
For the year ended 31 March 2022
Capital redemption reserve
Share capital Share premium Merger reserve Own Foreign exchange reserve Retained earnings(1)
shares Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2021 804 5,691 60,926 5 - 134 (6,906) 60,654
Profit for the year - - - - - - 97 97
Exchange differences on translation of foreign operations
- - - - - (226) - (226)
Transactions with owners
Shares issued 80 257 17,779 - (257) - - 17,859
Share cancellation (10) - - 10 - - - -
Dividends paid - - - - - - (603) (603)
Other adjustment - - - - - - (49) (49)
Share-based payments - - - - - - 427 427
Share options exercised - 501 - - - - - 501
Own shares purchased by EBT
- - - - (99) - - (99)
At 31 March 2022 (Audited)
874 6,449 78,705 15 (356) (92) (7,034) 78,561
( )
(1) Prior year figures have been re-presented to include the share option
reserve as part of retained earnings.
Consolidated Statement of Cash Flows
For the year ended 31 March 2023
Unaudited Audited
2023 2022
£'000 £'000
Cash flows from operating activities:
(Loss)/profit before taxation from total operations (18,971) 1,764
Adjustments for:
Depreciation 706 584
Amortisation of intangible assets 6,347 5,347
Impairment of intangible assets 1,770 -
Impairment of goodwill 9,995 -
Share-based payments 65 427
Foreign exchange gains (1) (292)
Finance expense 1,105 683
Loss/(gain) from fair value movement in contingent consideration
188 (152)
Loss on disposal of property, plant and equipment
6 4
Gain on sale of discontinued operations (1,606) -
Working capital adjustments:
Decrease/(increase) in trade and other receivables
1,271 (3,754)
(Decrease)/increase in trade and other payables (1,141) 3,488
Net cash (used in)/generated from operations (266) 8,099
Tax paid (1,522) (921)
Net operating cash (used in)/generated from continuing operating activities
(1,788) 7,178
Net cash used in discontinued operating activities(1)
- (563)
Net operating cash flows from total operations (1,788) 6,615
Cash flows from investing activities:
Net cash paid on acquisition of subsidiaries (1,969) (6,840)
Disposal of subsidiaries (127) -
Deferred consideration payment - (467)
Purchase of property, plant and equipment (340) (249)
Additions to intangibles (244) (292)
Proceeds from sale of property, plant and equipment
- 6
Net cash used in investing activities from continuing operations
(2,680) (7,842)
Net cash used in investing in discontinued operations(1)
- (165)
Net cash used in investing activities for total operations
(2,680) (8,007)
Cash flows from financing activities:
New borrowings 6,300 5,000
Proceeds from exercise of share options - 501
Purchase of own shares (548) (99)
Payment of lease liabilities (445) (362)
Interest paid (1,146) (683)
Dividends paid (815) (603)
Net cash generated from financing activities 3,346 3,754
Net (decrease)/increase in cash and cash equivalents
(1,122) 2,362
Cash and cash equivalents at beginning of the period
7,948 5,734
Effect of exchange rate fluctuations on cash held
(54) (148)
Cash and cash equivalents including cash from discontinued operations
6,772 7,948
Cash from discontinued operations - (34)
Cash and cash equivalents at end of the year 6,772 7,914
Comprising:
Cash at bank and in hand 6,717 7,864
Cash held by trust 55 50
Cash and cash equivalents at end of the year 6,772 7,914
(1) The cash flows of discontinued operations are immaterial to the
Consolidated Statement of Cash Flows for the year ended 31 March 2023 and so
have not been presented separately for the current financial year.
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 financial information set out in this announcement does not comprise the
Group's statutory accounts as defined in section 434 of the Companies Act 2006
for the year ended 31 March 2023. The statutory accounts for the year ended 31
March 2023 have not yet been delivered to the Registrar of Companies, nor have
the auditors yet reported on them. This preliminary announcement does not
constitute statutory accounts under section 435 of the Companies Act 2006.
2. Basis of preparation
The unaudited consolidated preliminary financial statements have been prepared
in accordance with applicable International Financial Reporting Standards
(IFRS) in conformity with the Companies Act 2006 and the AIM rules for
Companies.
The financial statements are presented in pound sterling (GBP), which is the
functional currency of the parent company.
Going concern
The Company secured a waiver of its lending covenants from its bankers at 31
March 2023 and agreed a further waiver at 30 June 2023. Amended covenants
(based on minimum liquidity and Adjusted EBITDA levels) will apply until the
quarter ending 30 September 2024, at which time the original leverage metrics
will be reinstated (Net debt to Adjusted EBITDA of 2.5x and Adjusted EBITDA to
interest cover at 4.0x)
After reviewing the budgets and cash projections for the next twelve months
and beyond, the Directors believe that the Company has adequate resources to
continue operations for the foreseeable future and to meet the requirements of
its debt covenants. For this reason they continue to adopt the going concern
basis in preparing the financial statements.
3. Accounting policies
The accounting policies used in the preparation of the unaudited preliminary
consolidated financial statements for the year ended 31 March 2023 are in
accordance with the recognition and measurement criteria of IFRS and are
consistent with those which were adopted in the annual statutory financial
statements for the year ended 31 March 2022.
The Group disposed of its subsidiary Greenshoot Labs Limited ('GSL') on 24 May
2022 to OpenDialog AI Limited (ODAL). Consideration of £2.2 million was
received through the allotment and issue of ordinary shares by ODAL and is
presented as an "Other investment" on the Group's consolidated statement of
financial position. The operations of GSL is presented as discontinued
operations with the comparatives and related notes restated accordingly. The
disposal generated a gain of £1.6 million included in the profit after tax on
discontinued operations in the year ended 31 March 2023.
4. Business combinations
On 6 April 2022, the Group acquired the entire issued share capital of Swirrl
IT Limited ("Swirrl"), a software and services business.
On 7 April 2022, the Group acquired the entire issued share capital of Peak
Indicators Limited ("Peak"), a visionary data science and analytics
consultancy offering services such as analytics, data engineering and data
science.
5. Borrowings
In July 2022 HSBC extended their revolving credit facility with the Group to
£30 million with a £15 million accordion. The new facility is a
sustainability-linked revolving credit facility that incorporates targets
which align with the Group's long-term ESG objectives.
6. Earnings per share
2023 2022
Number of Number of
shares shares
'000 '000
Weighted average number of shares for calculating basic earnings per share
90,185 86,211
Weighted average number of dilutive shares 3,839 1,768
Weighted average number of shares for calculating diluted earnings per share
94,024 87,979
2023 2022
£'000 £'000
(Loss)/profit after tax from continuing operations (19,003) 820
Profit/(loss) after tax from discontinued operations 1,445 (723)
(Loss)/profit after tax from total operations (17,558) 97
Adjusted profit after tax from continuing operations(1) 644 9,951
Earnings per share is calculated as follows:
2023 2022
Basic earnings per share
Basic earnings per share from continuing operations (21.1p) 1.0p
Basic earnings per share from discontinued operations 1.6p (0.8p)
Basic earnings per share from total operations (19.5p) 0.2p
Adjusted basic earnings per share from continuing operations
0.7p 11.5p
Diluted earnings per share
Diluted earnings per share from continuing operations(2) (21.1p) 0.9p
Diluted earnings per share from discontinued operations(2)
1.6p (0.8p)
Diluted earnings per share from total operations(2) (19.5p) 0.1p
Adjusted diluted earnings per share from continuing operations
0.7p 11.3p
(1) Adjusted profit after tax on continuing operations is defined in note 7.
(2) In the year ended 31 March 2023, 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.
7. 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.
Reconciliation of net debt (excluding lease liabilities):
2023 2022
£'000 £'000
Cash and cash equivalents 6,772 7,914
Borrowings due within one year - (20)
Borrowings due after one year (24,317) (18,000)
Net debt (17,545) (10,106)
Reconciliation of operating (loss)/profit to adjusted EBITDA:
2023 2022
£'000 £'000
Operating (loss)/profit (19,365) 3,209
Amortisation of intangible assets 6,347 5,347
Depreciation 706 584
Loss/(gain) from fair value movement in contingent consideration 188 (152)
Impairment of intangible assets 1,770 -
Impairment of goodwill 9,995 -
Share-based payments 65 427
Costs directly attributable to business combinations 229 1,013
Costs related to business restructuring 2,541 1,769
Adjusted EBITDA 2,476 12,197
Reconciliation of (loss)/profit before tax to adjusted profit after tax:
2023 2022
£'000 £'000
(Loss)/profit before tax on continuing operations (20,470) 2,526
Amortisation of intangible assets 6,347 5,347
Loss/(gain) from fair value movement in contingent consideration 188 (152)
Impairment of intangible assets 1,770 -
Impairment of goodwill 9,995 -
Share-based payments 65 427
Costs directly attributable to business combinations 229 1,013
Costs related to business restructuring 2,541 1,769
Adjusted profit before tax on continuing operations 665 10,930
Tax (excluding impact of amortisation of intangible assets) (21) (979)
Adjusted profit after tax on continuing operations 644 9,951
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