REG - TPXimpact Holdings - Trading Update and Board Changes

Tpximpact HoldingsAnnouncement

30/09/2022 07:01

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RNS Number : 2323B  TPXimpact Holdings PLC  30 September 2022

This announcement contains inside information

 

30 September 2022

 

 

 

TPXimpact Holdings PLC

("TPXimpact", "TPX", the "Group" or the "Company")

 

Trading Update and Board Changes

 

 

Ahead of its AGM being held at 11am today, the Company provides an update on
its first half performance and significant Board Changes.

 

Trading update

 

As the Group approaches the end of the first half of the current financial
year it today provides an update on trading in the year to date. Trading for
the first half of the year has been below our expectations, which will impact
the Group's full year results.

 

As the financial year commenced, management were committed to building
sufficient resource to enable strong top-line growth in both the short and
long-term. This primarily involved investment in talent in a central sales,
growth and bid management team, as well as increased investment in marketing
initiatives. This was particularly important in the context of the rebranding
of the Group as TPXimpact and the integration of the separate businesses into
a more co-ordinated divisional structure.

 

As the first half progressed, it became evident that management underestimated
the impact of the integration project on its people and, in particular, that
moving to a centralised sales, growth and bid management team had led to some
internal inefficiencies and was not working as effectively as had been
anticipated. This resulted in a Q1 order book lower than expected, impacting
revenues in Q2, as was referenced at the time of the announcement of TPX's
preliminary results on 19 July 2022. In Q2, the Group took action to
reposition the sales, growth and bid management team into the specific
divisions (largely the Consulting division) in order to bring them closer to
the account management and delivery teams driving ongoing and upsell revenue.
The Board remains of the view that the integration of the separate businesses
that form the Group is the correct strategy so as to enable long-term,
sustainable growth and the sales, growth and bid team are an intrinsic part of
this strategy. The Board is also committed to making further investment in
talent to enhance the Group's back-office (including finance, HR, and IT) so
as to be able to support the Group's continued expansion and growth.

 

These investments have resulted in a significant increase in the Group's
operating cost base which has impacted profit in H1, and will continue to do
so on an ongoing basis. In addition, there has been a short-term impact on
productivity and efficiency of client-facing staff which has impacted gross
margins in the first half.

 

During Q2, the order book has shown marked improvement, generating new
business in excess of £26m, reflecting the benefit of repositioning the
sales, growth and bid management team in that quarter. This new business
provides a solid foundation for H2 revenue expectations.

 

Given the above, the Board is now expecting full year revenues of around
£90m, broadly split 45%/55% between H1/H2. This reflects marginally more
weighting to H2 than last year (48%/52% H1/H2 on a proforma basis) but is also
a return to a more normal phasing of revenue across the year. H1 last year
benefitted from an acceleration in public sector spending on digital projects
as the UK emerged from the COVID-19 pandemic, which has not recurred this
year.

 

The Board is also encouraged to note that approximately 75% of the H2 revenues
needed to achieve its revenue expectations are represented by committed client
spend as at today's date. The remainder represents a realistic assessment of
pipeline opportunities that are currently (or will shortly be) in flight.

 

Gross margin is now forecast to be around 30% for the full year (31% last
year), although H1 gross margins will be below this average, before being
expected to recover in H2.

 

On that basis, the Group now expects full year Adjusted EBITDA to be in the
range of £7.0-7.5m, reflecting the investment in talent and operating costs
outlined above. H1 Adjusted EBITDA is expected to be around £1.0-1.5m,
reflecting the pressures on H1 performance as outlined above. Nevertheless,
the Board remains convinced that a fully integrated operating model is
strategically the most effective way in which to address the market and
leverage the depth of expertise and talent at its disposal. The Group will
continue to remain well within its banking and debt covenants with this new
outlook.

 

Given the momentum in new business evident from orders won during the course
of the summer, the level of committed spend within the reforecast and a
healthy pipeline of new projects, the Board is confident that H2 will show the
anticipated recovery in performance.

 

The Board continues to believe the digital transformation market in the UK -
in both the public and private sectors - remains vibrant and attractive, with
plenty of potential for continued growth. The Group expects to return to more
normal market trends in growth in the next financial year. Given an expected
like-for-like growth rate of around 10% in H2 this year, the Board expects to
achieve like-for-like top-line growth of around 10-15% next year and an
adjusted EBITDA margin of around 12%.

 

Board Changes

 

The Board also announces that Neal Gandhi and Oliver Rigby, co-founders &
CEO and CFO respectively, will both be stepping down from their executive
roles with effect as of 1 October.

 

This follows a rigorous process to identify the optimal structure to take the
business through its future ambitions of annual revenues of £200m and beyond.
Both Neal and Oliver have achieved great success in growing the Group from
scratch to its current position but believe that different skill sets are
required in order to lead the business through its next phase of sustainable
growth. As such, the Board is pleased to announce that Bjorn Conway will be
joining the Company as CEO. Between 2011 and 2016, Bjorn led EY's UK
Government and Public Sector team operating across central government, local
government, health and infrastructure. The business doubled in size over 5
years and was EY UKI's largest market segment. Since then, Bjorn has
concentrated on building a number of private businesses, including Dx3 where,
as Founding Partner, he has focused on building integrated, full-spectrum
digital transformation businesses.

 

Steve Winters, currently Deputy Group CFO, becomes Group CFO. Steve joined in
April 2022 on an interim basis and has been heavily involved in the
transformation of the divisional and central finance teams, expanding the
quarterly re-forecasting and management reporting process, as well as
contributing to the FY22 Annual Report and audit. Prior to joining TPXimpact,
Steve was a long-standing member of the leadership team at WPP plc where he
worked for over twenty years, most recently as Deputy Group CFO, and prior to
that, as Group Chief Accountant.

 

Both Bjorn and Steve will take up their roles as of 1 October and will be
appointed to the Board of the Company following the completion of the
necessary regulatory background checks. Further announcements will be made at
the appropriate time.

 

Neal Gandhi will remain on the Board as a Non-Executive Director. Oliver Rigby
will step down from the Board as of 1 October but remain with the Group as
Director of Corporate Development.

 

Mark Smith, Chairman, commented:

 

"Neal and Olly have done a remarkable job in founding and then growing the
Company to more than 900 people, including associates, in such a short period
of time. Following the important strategic decision to unify all businesses,
the Group is now well placed to become a multi-hundred million pound revenue
business in the coming years. Having begun discussing their futures with the
Board some months ago, Neal and Olly have demonstrated exceptional
self-awareness in recognising their strengths and weaknesses and understanding
that a different type of leadership is required if the Company is to achieve
its full potential.

 

"Bjorn Conway has an excellent track record in the UK Public Sector and has
the relevant skills needed to take the business forward. I am excited to
welcome him to TPXimpact. Steve Winters has impressed since he joined in April
and, through his time at WPP, is used to working with large, complex and
multi-faceted reporting structures. As a Board we are confident that the
combination of Bjorn and Steve alongside our Senior Leadership Team will be
ideally placed to achieve our growth ambitions."

 

Neal Gandhi, Founder and Non-Executive Director, commented:

 

"It has been a great privilege to lead TPX and I am incredibly proud of all
that Olly and I have achieved at the helm. Although the trading in the first
half is clearly disappointing, the cause has been identified and resolved, as
can be seen through the excellent sales performance in the second quarter.

 

I have been impressed with Bjorn throughout the recruitment process and
believe that he can drive TPX as it benefits from the continued commitment to
digital transformation in the UK Public Sector. As a Non-Executive Director
and major shareholder I look forward to helping him and the rest of the Board
and ensuring that the Company continues to marry purpose with financial
success."

 

 

The person responsible for this announcement is Neal Gandhi, CEO

 

 TPXimpact Holdings                 Via Alma PR

 Mark Smith, Chairman

 Steve Winters, Deputy Group CFO

 Stifel Nicolaus Europe Limited    +44 (0) 207 710 7600

 (Nomad and Joint Broker)

 Alex Price

 Fred Walsh

 Ben Burnett

 Dowgate Capital Limited            +44 (0) 203 903 7715

 (Joint Broker)

 James Serjeant

 Russell Cook
 Alma PR                           tpx@almapr.co.uk

 (Financial PR)                    +44 (0)7780 901979

 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 Company 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 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 (http://www.tpximpact.com)
.

 

 

 

 

 

 

 

 

 

 

 

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