Idox plc
(‘Idox’ or the ‘Group’ or the ‘Company’)
FY21 Results
“Another year of strong financial performance and strategic and operational progress”
Idox plc (AIM: IDOX), a leading supplier of specialist information management software and solutions to the public and asset intensive sectors, is pleased to report its financial results for the year ended 31 October 2021.
Financial highlights
Reconciliations between adjusted and statutory earnings are contained at the end of this announcement.
Continuing operations (excluding disposed Idox Content businesses1):
Revenue
- Revenue increased by 9% to £62.2m (2020: £57.3m), including 5% organic increase.
- Recurring revenue2 increased by 2% to £36.3m (2020: £35.7m).
Profit
- Adjusted3 EBITDA increased by 13% to £19.5m (2020: £17.2m).
- Adjusted3 EBITDA margin improved to 31% (2020: 30%).
- Operating profit increased by 90% to £7.6m (2020: £4.0m). Operating profit margin improved to 12% (2020: 7%).
- Adjusted4 diluted EPS increased by 54% to 2.27p (2020: 1.47p).
- Diluted EPS increased to 1.34p (2020: 0.11p).
Cash and debt
- Free cashflow5 of £7.1m (2020: £11.2m) following planned repayment of 2020 VAT deferrals.
- Disposal of Content businesses generated net proceeds of £10.7m; 3 acquisitions completed in the year with initial net consideration of £10.5m.
- Net debt6 at 31 October 2021 reduced by 50% to £8.1m (2020: £16.1m).
Dividend
- Final dividend of 0.4p per share (2020: 0.3p) declared, reflecting the strong cash generation and healthy financial position of the Group.
Operational highlights
Idox has maintained good progress against the Group’s strategic goals whilst delivering successful operational execution:
- Material advancement in our M&A strategy to focus capital on core software businesses with high margin operations and good growth potential:
- Disposal of Content businesses, in line with our continued simplification and focus on software operations.
- Acquisition of Aligned Assets, thinkWhere and exeGesIS, which enhance our Public Sector offering and provide greater focus and depth of expertise in the GIS (geospatial information services) market.
- Further development of our M&A ambitions in both sourcing and managing pipeline opportunities.
- Improvements to our product and go-to-market efforts; now fully managed and reported in our new Group-wide CRM platform.
- Consolidated all offshore activity to a single Idox centre in Pune, India.
- Clear focus on innovation and consolidation of our product portfolio, including continuing our journey to cloud across our portfolio.
- Further investment in our people promoting higher levels of engagement, and leadership.
- Increasing our commitments to Environmental, Social and Governance initiatives; conducting business responsibly is core to our business model and long-term strategic goals.
Current trading and outlook
- FY22 has started well, in line with expectations.
- Combination of recurring revenue and order book, driven by H2 sales orders, and resilient public sector markets, provides good visibility for FY22 revenue.
- The sales pipeline for FY22 remains encouraging.
- FY21 acquisitions integrating well and to plan, and good line of sight over an attractive M&A pipeline.
David Meaden, Chief Executive of Idox said:
“We are pleased to report another year of strong financial performance, and strategic and operational progress.
After exiting our non-core Content businesses in March 2021, we acquired three excellent Public Sector software businesses, improved our balance sheet strength, and extended our financing facilities for a further 18 months, to June 2024, on improved terms.
We have invested in our people, improved our engagement with customers and focused our product efforts in response to the increasing pace of the move to digitisation and cloud. We continue to improve our supporting infrastructure and processes to ensure efficient and effective execution, and to support our ambitions to continue to grow both organically and inorganically.
The outlook for the business remains strong and we are well positioned in our ‘fly’ stage of growth to continue to create good value for our people, customers and shareholders.”
There will be a webcast at 10:00am UK time today for analysts and investors. To register for the webcast please contact MHP Communications on [email protected]
For further information please contact:
| Idox plc | +44 (0) 870 333 7101 |
| Chris Stone, Non-Executive Chairman | |
| David Meaden, Chief Executive | |
| Rob Grubb, Chief Financial Officer | |
| Peel Hunt LLP (NOMAD and Broker) | +44 (0) 20 7418 8900 |
| Edward Knight | |
| Paul Gillam | |
| James Smith | |
| MHP Communications | + 44 (0) 203 128 8170 |
| Reg Hoare | [email protected] |
| James Bavister | |
| Harry Clarke |
About Idox plc
For more information see www.idoxplc.com @Idoxgroup
Alternative Performance Measures
These items are excluded from statutory measures of profit to present a measure of cash earnings from underlying activities on an ongoing basis. This is in line with management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers.
There have been no adjustments to any of our reporting metrics for any impact of the Covid-19 pandemic.
1 The comparatives have been restated due to the Content business being reclassified as discontinued operations. There has been no change to the overall results.
2 Recurring revenue is defined as revenues recognised from support and maintenance fees, managed service fees (including for hosting) and Software-as-a-Service subscription fees.
3 Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. Share option costs are excluded from Adjusted EBITDA as this is a standard measure in the industry and how management and our shareholders track performance.
4 Adjusted EPS excludes amortisation on acquired intangibles, restructuring, financing, impairment, share option and acquisition costs.
5 Free cashflow is defined as net cashflow excluding: acquisitions / disposals, debt repayments & drawdowns, and shareholder placing & dividends.
6 Net debt is defined as the aggregation of cash, bank borrowings and long-term bond.
Annual financial report announcement
The extracts below are from the Annual Financial Report 2021. Note references refer to notes included in this Annual Financial Report Announcement 2021.
Chairman’s statement
Introduction
I am pleased to be able to report an excellent set of results to all of our shareholders and other stakeholders for this financial year. Since the appointment of David Meaden as CEO the business has been thoroughly transformed and we are now seeing the continuing and sustained benefits of this transformation in the results that Idox is delivering. It is rewarding to be able to report on another year of growth in revenues, profits and most importantly, cash, and a return to paying a dividend. In business, no success story can be taken for granted, but this transformation is notable and sets the business up well for future success.
The past three years have seen a lot of change to our Board of Directors and senior management team, but fortunately we had managed to make most of these changes before having to deal with the impact of the Covid-19 pandemic. Consequently, the business has been managed consistently and steadily through a difficult phase, and the stability that comes from a settled management team has allowed us to make a couple of quite important strategic changes in our portfolio.
During the year we disposed of two non-core businesses: our compliance business, based in Germany and Belgium; and our grants consultancy business, based in the Netherlands. Both are good businesses in their own right but did not enjoy a particularly strong strategic fit with our core software businesses. I would like to thank the management and the staff of both businesses for their very professional behaviour during the disposal processes and we wish them and their new shareholders the very best of luck in taking the businesses forward.
The cash generated from these disposals, together with the cash that we are now generating from our own operations, has given us the firepower to make a number of acquisitions that demonstrate a stronger strategic fit with our core business. During the year we made 3 acquisitions; Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd. All of these businesses bring exciting new capabilities that fit very well with our core business, and we are pleased to welcome our new colleagues and look forward to working with them to deliver value to both existing and new customers from the combination of products and services that we can now offer.
The investments that we have made over the past few years in improving our core back-office systems and processes have allowed us to set a target of generating over 30% margin from our mature operations. I am pleased to say that we have achieved that target in several areas of our business, with potentially a bit more improvement to come as we further refine our processes.
In early 2021, we received an unsolicited approach for the Group. Our strategy was to reject offers until the proposed offer price was at a point where the Board felt that, if this were to be confirmed, it was at a level that shareholders would want to consider. Ultimately, the proposed offer did not materialise, and I am pleased to note that the inevitable workload associated with such an approach did not distract our colleagues from the focus required to deliver the excellent results described above.
As we move into the new financial year, we can expect to see continued growth in our core businesses enhanced by the acquisitions we have already made. We will also continue to target further acquisitions to allow us to continue to leverage the platform that we have created through our operational investments.
The Covid-19 pandemic has affected everyone and Idox is no exception. As I mentioned in my last report, we have been fortunate that demand for our products and services did not drop during the Covid-19 pandemic, and the excellent attitudes displayed by our colleagues in figuring out practical and effective ways of working with the many new restrictions meant that Idox did not suffer financially through this period. However, we have all adopted new ways of working, new attitudes towards essential and non-essential travel, and blended home and office work. Employers need to work hard and creatively to enable appropriate new ways of working that meet all these new requirements without allowing a drop in the most important thing, excellent customer service. I have been very impressed by the continuing positive attitudes and behaviours of all our colleagues.
Group Strategy
The Group continued its focus on providing digital solutions and services to the public sector in the United Kingdom, complemented by our Engineering Information Management (EIM) business servicing customers across the world. The key to our success is to ensure we deliver better user results and productivity improvements for customers through focusing on usability, functionality and application of integrated digital and increasingly cloud-based technologies and solutions. As mentioned above, we were able to accelerate the development of this strategy through the disposal of businesses that did not fit this model, and the integration of further acquisitions where we identify businesses that can accelerate our progress. We expect to continue to make such accretive acquisitions in the coming year.
Board
There have been no changes to the Board in FY21 following a number of changes in the prior year. We carried out a formal Board Effectiveness review during the year, and there were some good points raised which we will be incorporating in the coming year.
The Board of Directors has one female Director. I am satisfied that there is sufficient diversity in the Board structure to bring a balance of skills, experience, independence, and knowledge to the Group, however, I intend to keep this balance under review and continued assessment.
Corporate governance
We are cognisant of the important responsibilities we have in respect of Corporate Governance and shaping our culture to be consistent with our objectives, strategy, and business model which we set out in our Strategic Report and our description of Principal Risks and Uncertainties. The Group is committed to conducting its business fairly, impartially, in an ethical and proper manner, and in full compliance with all laws and regulations. In conducting our business, integrity is the foundation of all Company relationships, including those with customers, suppliers, communities, and employees.
Corporate simplification
As highlighted above, during the financial year we disposed of our non-core Content businesses and reinvested in the acquisition of three new companies, Aligned Assets, thinkWhere and exeGesIS, which will enhance our core public sector software offering.
The trade and assets of Idox Health Limited was hived into Idox Software Limited, in line with our corporate simplification strategy. We also completed the consolidation of our Maltese entities during the year, hiving five entities in to one.
Dividends
The Board has proposed a final dividend of 0.4p to be paid (2020: 0.3p) for FY21, bringing the total for the year to 0.4p (2020: 0.3p). Subject to approval at the AGM, the final dividend will be paid on 8 April 2022 to shareholders on the register at 25 March 2022. This decision was reached after a full consideration of the pace of recovery in our business, our strong financial position and our confidence in the future.
Summary and outlook
The financial results of the last year reflect the quality of the Idox business. We operate in good markets, with strong market positions and insights, and we have every confidence that we can continue the excellent progress we have seen in FY21. The changes that we have made in the last couple of years, to the team, our structure, systems, and processes have delivered a step-change improvement in our financial performance. I am pleased to have had the opportunity to work with all my Idox colleagues during a period of such tremendous improvement and I look forward to continuing that work in delivering growing value to all our stakeholders.
Idox shareholders are fortunate that such a talented group of people, comprising our entire workforce, have chosen Idox as a place they want to work. Their expertise and diligence have continued to deliver the support and value that our customers expect, and I am pleased to extend my thanks to all of them.
Chris Stone
Chairman
Chief Executive’s review
Overview
I am pleased to report another successful year at Idox, where our teams across the Group have worked with great determination and fortitude through the ongoing and obvious impacts caused by the Covid-19 pandemic. We have adapted to the challenges of working from home and more latterly, hybrid models for collaboration and teamworking. I am tremendously proud of the way all my colleagues have come together and made the required adjustments in their day-to-day activities to deliver for customers and to drive the business forward.
Idox has become synonymous with our strategy defined by 4 Pillars and 3 Phases. The 4 Pillars of Revenue, Margin, Simplification and Communication have become engrained in our operations and provide the foundations upon which we have delivered the Walk and Run phases of our journey.
The improved strategic focus of the business, coupled with thorough operational management of the business, has produced improved financial results and the subsequent reduction in net debt has provided the basis for strategic progress as we move into the Fly phase of our journey.
The continued focus on producing software to manage complex business process, legislative and regulatory environments is the essence of our business model. This focus and clarity about what we do and where we add substantive value for customers informed our decision to sell the Content division, through two transactions to separate private equity organisations. It has also provided us with clarity in the delivery of our ongoing acquisition strategy, where we have identified new capabilities that enhance our existing offerings and work to increase the target addressable markets available to us.
We were delighted to complete the acquisitions of Aligned Assets, thinkWhere and exeGesIS during the year and each of these businesses offer complementary software and data capabilities to the Group. The addition of these address management and GIS capabilities allows us to provide extended service engagements into specific areas of the private sector that are also connected to the built environment and plantech markets we have long served, offering exciting opportunities for future growth and product development for our Group.
Today Idox is well placed in its markets, where we improve professional and expert processes and support clients in their transition to becoming modern, agile organisations operating digitally and through the Cloud. We are leaders in software for the built environment, modern transportation networks, digitisation, elections and facilities management. We empower those that need extra support in special educational needs and disability and our software also manages the sexual health of the nation. Furthermore, with the addition of Aligned Assets, exeGesIS and ThinkWhere we can improve client data quality and improve the accuracy, accessibility and presentation of their address and geo-spatial information.
Our markets
We continue to see some impact on our markets of the Covid-19 pandemic, although retention rates for existing customers remains high as our systems are typically central to the processes they support.
We have seen a slowdown in some new business activity compared to pre-Covid-19 pandemic levels, particularly in our Health and Social Care businesses as client resources have been diverted to directly support response to the Covid-19 pandemic, and in EIM where a slowdown in consumer and industrial consumption generally in FY20 and the first half of FY21 has impacted the engineering projects our software supports. Conversely, we have seen high demand for our services across our portfolio, as our clients look to us as a trusted partner to maintain, maximise and extend existing deployed solutions.
We continue to be active in our chosen markets, bringing thought leadership and regular market engagement to identify current and future problems in our client-base and adjusting our product development plans accordingly. In addition, we are acquiring well-respected product businesses that enhance and extend our offerings to our customers and end markets.
Managing our business
Across our organisation we focus on our Four Pillars of Revenue, Margin, Simplification and Communication. This approach provides cohesion for the whole Group. The Four Pillars are well-articulated across the organisation and embedded into our onboarding process for people joining the organisation. This focus ensures that everyone in the Group can make a meaningful contribution to our overall success and has provided the basis on which the organisation has discovered and articulated its values.
Revenue
We have established strong business controls such that we do not pursue revenue for the sake of growth, but that we focus on products with the certainty of delivering lasting value to customers. We make sure that we fully understand the financial and operational implications for each piece of business that we contract. This results in improving the amount of recurring revenue in the business, providing a strong foundation for future growth in both revenues and margins.
During the year we improved revenues on a continuing basis by 8.6% to £62.2m including our acquisitions (5.5% excluding acquisitions).
Sales Orders
During the year we established a centralised Revenue Assurance unit and completed the integration of the sales operations to include the EIM sales group. We closed over 4,000 orders to a total contract value of £61.6m and welcomed over 150 new customers to Idox.
We continued to deliver modern, digital SaaS platforms for built environment and public protection customers through Idox Cloud applications and FY21 saw significant new wins at Coventry City Council, Warrington Borough Council, Birmingham City Council and the Government of Bermuda. In addition, we saw continued success with our conversion to the cloud strategy with wins including Leicester City Council, Royal Borough of Chelsea & Westminster and the City of Cardiff Council along with the provisioning of private cloud services to our Uniform customer base, including The City of Edinburgh Council. We also saw some early success from our acquisitions, with Aligned Assets winning important contracts with the national gas and electricity supplier switching project to provide address matching services, and with the Metropolitan Police to provide Risk Intelligence services for the whole of Greater London.
In our Health & Social Care businesses we recorded wins including Medway NHS Foundation Trust for the tracking of their day forward packs; and North Somerset Council, who became the latest user of our Education, Health and Care Hub as part of an overall 24-month programme to significantly improve special educational needs and disabilities service provisions within the Council.
In Elections we were successful with Bracknell Forest Council implementing the Idox Election Management System, deployed through a Microsoft Azure environment, managing the council’s full breadth of electoral services and, replacing their long-term incumbent solution.
In Computer Aided Facilities Management (CAFM) we recorded a number of wins, such as BCAS Bio Medical Services to manage maintenance of hospital devices following a highly successful trial, along with BET365 and DHL to manage facilities within their own organisations. In Databases we secured 96 new GrantFinder Customers and 21 new ResearchConnect Customers. In Transport we continued to closely support the ongoing Toronto Metrolinx project which is due to go live in the coming financial year, and secured long-term commitments from both Cornwall and Somerset for their development solutions.
After a slower start to the year in the EIM Division, FusionLive, our Engineering Document Management solution, secured 11 new customer wins in H2. This included a 5-year agreement with EBLA, which involved the capture of 10.5m project documents and drawings for the existing Doha International Airport as well as the current expansion to scale up for the 2022 Football World Cup. Over 1,000 documents per day are uploaded into the system from engaged engineering contractors. Other new customers included Rosetti Marino and Audubon Engineering, who will be using FusionLive across all group projects within their portfolios.
Margins
During a year of obvious Covid-19 pandemic challenges, we have seen increased demand for services from our clients. Accordingly, we have seen an improvement in our effectiveness in delivering professional services to customers and this has helped to drive further improvement in margins across our operations.
We have seen an improvement in Adjusted EBITDA margins to 31% (2020: 30%) in our continuing business over the past twelve months. We recorded a statutory profit before tax for continuing operations of £7.3m (2020: £1.8m), representing a statutory profit before tax margin of 12% (2020: 3%). With our desire and ambition to be a ‘Rule of 40’ business, we feel that further improvements in sales of existing offerings to our current clients and entry into new near adjacent markets with our newly acquired capabilities position us well for future margin growth.
We take pride across our teams in delivering effectively to customers and this in turn ensures that we enjoy strong cash generation for our activities. At the end of the financial year, we had a net debt position of £8.1m. We have seen net cash generation and a reduction in debt over the last three financial years of £23.7m (a 75% reduction).
Across the Group we have continued to drive initiatives that we believe will deliver improved margins. This included a fundamental review of our approach to data migration and in particular data mapping, with tooling developed to remove the need for our customers to map data items. This will reduce lead times, improve quality and enhance new customer experience in the critical early days of working with Idox. Also of note, our sexual health product reached a significant milestone with the release of our SaaS self-service platform, which we believe is the first to be fully NHS digital, data and technology standards compliant; and we successfully transitioned our education, health and care (‘EHC’) customers to the Idox Cloud SaaS platform.
Simplification
We continue in our efforts to maintain the Group as a well-run, simple and efficient organisation. Following the disposals of our Content division, Idox is now a single business providing software-based solutions to the Public Sector and Engineering markets.
During the period we have continued to streamline our operations with the consolidation of all UK activities into our main UK trading company, Idox Software Limited. The trade of Aligned Assets and thinkWhere transferred to Idox Software Limited on 1 November 2021 and exeGesIS will be similarly transferred in early FY22. This consolidation allows us to maintain single customer, people and tax structures which provides clarity, simplicity, and superior service to all involved.
We continue with ongoing development of our CRM installed in the prior year, and to improve the integration and utility of our ERP. We have expanded the use of CRM by embedding our key sales approval processes, installing a new configure, price and quoting process to improve the processing of customer orders, and established new reporting to understand progress in sales pipeline management and reporting of revenues. In our ERP, we have undergone a programme of industrialising a number of processes, allowing their measurement in real-time. These investments in our processes and systems help bring clarity and efficiencies through lower processing times and better information and provide a strong base for our ongoing and planned future growth.
We have maintained our commitment to high quality processes by renewing our ISO 9001 (Quality Management), ISO 14001 (Environmental Management), ISO 45001 (Occupational Health & Safety) and ISO 27001 (Information Security Management) as well as achieving certification for ISO 22301 (Business Continuity).
Communication
This year we have continued to improve the way we work and communicate with our customers through our direct account management teams, internal sales support and our project management office. In addition, we have developed the “Idox, Do More” proposition to help deliver a consistent brand and message; this includes a number of thought leadership positions that explore in detail the challenges our clients face and how people, process and technology solutions combine to improve service, efficiency and public engagement.
We have continued to engage openly with all our teams and to address issues and challenges identified with gusto. We host regular CEO broadcasts along with forums and workshops to work through any issues raised that require business attention or improvement. Increasingly, these activities are initiated and driven by teams formed across the business that have a shared interest rather than initiated from a top-down approach. This is a good sign of a healthy and vibrant business. We also aim to reflect our own people’s desire for Idox to be a socially responsible and sustainable business.
As we described in prior reports, we have embraced more flexibility in our working patterns across the Group and have listened carefully to our teams about what works for them and is practical. We do not intend to mandate a return to offices, and we will continue to work flexibly. We have offered continuing support to our teams to ensure good mental health is maintained and our Idox Wellbeing team, which is drawn from across the business, provides mental health support to the Group and we are all grateful for their continued commitment to this activity.
The Idox leadership development programme that ran in 2021 has proven very successful. As we move into 2022, we have a further 70 individuals committing to a year-long programme of self-development. We are grateful to the 33 people that committed to the programme in 2021, for exemplifying our DRIVE values and for their ongoing contribution to the success of the Group.
Responsible Idox and ESG
We recognise the importance of our responsibilities in respect to ESG. In FY21 we formed an ESG steering committee, with the responsibility of understanding and monitoring how our business practices are sustainable in environmental and social terms, as well as being well governed. This year we publish our ESG plans in detail within this financial report, and I am proud that these are an authentic representation of our progress and ambition in this area.
Outlook
FY22 has started well and we continue to trade in line with expectations. We will continue to invest selectively to grow our capabilities and support our customers. The business has a strong foundation in property and asset-based solutions and this, along with our focus on digital transformation and Cloud provision, will underpin our future strategy and growth.
A successful business rests upon the quality of its teams and the desire and ability to go that extra step for customers, colleagues, and shareholders. Over the past three years we have invested in our people and have sought to create an environment that develops talent and is welcoming to new team members. We believe this lays the foundation for our future success and this combined with our investments in governance, processes and infrastructure will support our future progression as a successful business. We continue to have financial resources at our disposal for accretive and enhancing acquisitions and, having shown that this can be delivered successfully, we look forward to driving shareholder value moving forward and becoming a ‘rule of 40’ business.
David Meaden
Chief Executive Officer
Financial review
The financial year ended 31 October 2021 has seen a lot of change, consistent with our continued corporate simplification and focus on our core public sector software markets. The Content businesses were disposed of in March and April 21 for net proceeds of £10.7m, whilst the proceeds from the disposal were reinvested in the acquisition of Aligned Assets, thinkWhere and exeGesIS, for initial net consideration of £10.5m. A strong focus on sales and commercial governance has enabled us to pursue only earnings-enhancing revenues. This approach has resulted in improving revenue, Adjusted EBITDA and improved cash generation, for continuing operations, compared to prior periods.
Idox Content is classified as discontinued operations given the disposal of its businesses during the year. In addition, corporate costs previously allocated to Idox Content in FY20 have been reduced by £1,348,000 to better reflect the actual reduction in corporate costs as a result of the discontinued operations.
The following table sets out the revenues and Adjusted EBITDA for each of the Group’s segments from its continuing and discontinued activities:
| FY21 | FY20 | Variance | |||
| £000 | £000 | £000 | % | ||
| Revenue | |||||
| – Public Sector Software | 54,114 | 48,426 | 5,688 | 12% | |
| – Engineering Information Management | 8,071 | 8,858 | (787) | (9%) | |
| – Idox Software | 62,185 | 57,284 | 4,901 | 9% | |
| – Idox Content (discontinued) | 3,897 | 10,733 | (6,836) | (64%) | |
| – Total | 66,082 | 68,017 | (1,935) | (3%) | |
| Revenue split | |||||
| – Public Sector Software | 82% | 71% | |||
| – Engineering Information Management | 12% | 13% | |||
| – Idox Software | 94% | 84% | |||
| – Idox Content (discontinued) | 6% | 16% | |||
| Adjusted EBITDA* | |||||
| – Public Sector Software | 17,969 | 15,536 | 2,433 | 16% | |
| – Engineering Information Management | 1,550 | 1,702 | (152) | (9%) | |
| – Idox Software | 19,519 | 17,238 | 2,281 | 13% | |
| – Idox Content (discontinued) | 276 | 2,346 | (2,070) | (88%) | |
| – Total | 19,795 | 19,584 | 211 | 1% | |
| Adjusted EBITDA margin split | |||||
| – Public Sector Software | 33% | 32% | |||
| – Engineering Information Management | 19% | 19% | |||
| – Idox Software | 31% | 30% | |||
| – Idox Content (discontinued) | 7% | 22% | |||
| – Total | 30% | 29% | |||
* Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs.
Continuing operations – PSS and EIM
The PSS and EIM divisions, accounting for 94% of Group revenues (2020: 84%), delivered revenues of £62.2m (2020: £57.3m).
| FY21 | FY20 | Variance | |||
| £000 | £000 | £000 | % | ||
| Continuing revenues | |||||
| – Recurring (PSS) | 30,111 | 28,863 | 1,248 | 4% | |
| – Recurring (EIM) | 6,139 | 6,886 | (747) | (11%) | |
| – Non-recurring (PSS) | 24,003 | 19,563 | 4,440 | 23% | |
| – Non-recurring (EIM) | 1,932 | 1,972 | (40) | (2%) | |
| 62,185 | 57,284 | 4,901 | 9% | ||
| – Recurring* | 58% | 62% | |||
| – Non-recurring** | 42% | 38% | |||
* Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed Service arrangements which involve a fixed fee irrespective of consumption.
** Non-Recurring revenue is defined as revenues without any formal commitment from the customer to recur on an annual basis.
Recurring revenues have increased in PSS due to the acquisitions made in the second half of the year which have delivered recurring revenues of £1.1m. The recurring revenues in EIM have decreased in the year due to some contracts coming to their end and not being renewed. The proportion of recurring revenues has decreased slightly due to non-recurring revenues growth slightly outpacing our recurring revenues.
Non-recurring revenues have increased also due to the impact of the continued high levels of sales governance implemented over the last 2 years, resulting in higher recoveries.
Adjusted EBITDA increased by 13% to £19.5m (2020: £17.2m), delivering an improved EBITDA margin of 31% (2020: 30%). The margin improvement has been driven by the increased revenues converting strongly to margin and has been boosted by the high margin acquisitions of Aligned Assets and exeGesIS that were made in the year.
We continue with our efforts to improve efficiencies through marginal gains across our sales, development, professional services and support activities, and leverage our common resources to drive higher margins through improved economies of scale.
Discontinued operations – Content
The Content division recorded a revenue reduction of 64% to £3.9m (2020: £10.7m) and a decrease in Adjusted EBITDA of 88% to £0.3m (2020: £2.3m) as a result of the businesses being disposed of in March and April 2021.
| FY21 | FY20 | Variance | |||
| £000 | £000 | £000 | % | ||
| Idox Content revenues | |||||
| – Recurring | 604 | 1,626 | (1,022) | (63%) | |
| – Non-recurring | 3,293 | 9,107 | (5,814) | (64%) | |
| 3,897 | 10,733 | (6,836) | (64%) | ||
| – Recurring | 15% | 15% | |||
| – Non-recurring | 85% | 85% | |||
Profit before tax for continuing operations
The reported profit before tax was £7.3m (2020: £1.8m). The reasons for the improved adjusted EBITDA are set out above, and the reasons for the movements in all other constituent parts of profit before tax are set out below. The following table provides a reconciliation between adjusted EBITDA and statutory profit before taxation for continuing operations.
| FY21 | FY20 | Variance | |||
| £000 | £000 | £000 | % | ||
| Adjusted EBITDA | 19,519 | 17,238 | 2,281 | 13% | |
| Depreciation and Amortisation | (10,204) | (10,063) | (141) | 1% | |
| Restructuring costs | 90 | (1,748) | 1,838 | (105%) | |
| Acquisition costs | 134 | (125) | 259 | (207%) | |
| Financing costs | (110) | (306) | 196 | (64%) | |
| Share option costs | (1,789) | (1,004) | (785) | 78% | |
| Net finance costs | (372) | (2,177) | 1,805 | (83%) | |
| Profit before taxation | 7,268 | 1,815 | 5,453 | 300% | |
Restructuring gains were £0.1m (2020: £1.7m costs). The restructuring of business units in the prior year has now largely been completed and as a result restructuring costs have been significantly reduced and represent a small gain in the current year. Restructuring costs are analysed as follows:
| FY21 | FY20 | Variance | |||
| £000 | £000 | £000 | % | ||
| Redundancies | (22) | (245) | (223) | (91%) | |
| Disposal of subsidiaries | 32 | (397) | (429) | (108%) | |
| Take over approach | (171) | – | 171 | n/a | |
| Litigation | – | (34) | (34) | (100%) | |
| Property | 251 | (1,072) | (1,323) | (123%) | |
| Total restructuring costs | 90 | (1,748) | (1,846) | (106%) | |
Acquisition gains of £0.2m (2020: £0.1m costs) relates to the acquisition of Aligned Assets, thinkWhere and exeGesIS in the year. The prior year is in relation to the final settlements to the acquisition of Idox Cloud (formerly Tascomi) in August 2019.
There were no impairments in the year (2020: £Nil).
Financing costs of £0.1m (2020: £0.3m) relate to professional fees incurred as part of the loan extension and transition to SONIA from LIBOR in October 2021. The prior year costs were incurred as part of the refinancing in December 2019.
Share option costs of £1.8m (2020: £1.0m) relate to the accounting charge for awards made under the Group’s Long-term Incentive Plan.
Net finance costs have decreased to £0.4m (2020: £2.2m) as a result of less interest being payable in respect of the Group’s decreased banking facilities which were fully drawn in the second half of the prior year as part of our Covid-19 pandemic defensive actions. Additionally, the effective interest rate accounting adjustments have decreased as a result of the change in drawn loan balances.
The Group continues to invest in developing innovative technology solutions across the Idox Software portfolio and has incurred capitalised development costs of £4.6m (2020: £4.7m).
Taxation
The effective tax rate (ETR) for the year was 9.4% (2020: 52.8%) for total operations. The ETR for the year for continuing operations was 17.0% (2020: 73.7%).
The main factors for the reduction in the volatility in the ETR on the profit before tax position was the significant increase in the profit before tax as well as the disposals in the year which resulted in income not subject to tax meaning, permanent and other differences giving rise to ETR effects were proportionately lower. These differences included routine non-allowable amounts in addition to international losses not recognised in the period and higher overseas tax rates.
There are substantial carried-forward losses not recognised for deferred tax purposes to date, owing to adoption of a prudent loss recognition position. The gross value of these losses not recognised to date totals £10.8m, split across Malta (£8.5m), the UK (£0.6m), and France (£1.7m). The Board is hopeful that the Group will benefit from these unrecognised tax losses, with the exception of Malta, in the future and these will be recognised at the point where utilisation becomes more certain.
Earnings per share and dividends
Basic earnings per share for continuing and discontinued operations improved to 2.71p (2020: 0.29p) as a result of the Group reporting a significantly larger profit after tax compared to that in FY20. Diluted earnings per share improved to 2.65p (2020: 0.29p).
Adjusted earnings per share for continuing operations increased to 2.33p (2020: 1.50p) as a result of the Group reporting a significantly larger profit after tax compared to that in FY20, as well as reduced restructuring costs in the year. Adjusted diluted earnings per share increased to 2.27p (2020: 1.47p).
The Board proposes a final dividend of 0.4p per share (2020: 0.3p), which represents a total dividend for the year of 0.4p per share (2020: 0.3p), at a total cost of £1.8m (2020: £1.3m).
Balance sheet and cash flows
The Group’s net assets have increased to £60.8m compared to £47.0m at 31 October 2020. The constituent movements are detailed in the Group’s consolidated Statement of Changes in Equity: which are summarised as follows:
| 12 months to 31 October 2021 £000 | |
| Total Equity as per FY20 Financial Report | 46,958 |
| Share option movements | 2,081 |
| Fair value of deferred consideration shares on purchase of subsidiary | 1,261 |
| Equity dividends paid | (1,331) |
| Profit for the year | 11,949 |
| Exchange gains on translation of foreign operations | (108) |
| Total Equity as per FY21 Financial Report | 60,810 |
The increase in the Group’s net assets is principally due to the profit for the year, with a significant improvement in net debt in the year as the Group continued to target cash generative revenues and margins across its business. This is bolstered by the increase of intangible assets due to the purchase of three acquisitions in the year, and partially offset by the increase in deferred consideration payable on these acquisitions. The Group has deferred VAT of £1.0m as at 31 October 2021 (2020: £3.9m), which it is anticipated will be repaid in the year ended 31 October 2022.
Cash generated from operating activities after tax as a percentage of Adjusted EBITDA was 85% (2020: 124%). This decrease was due primarily to the VAT liability deferrals the Group took advantage of as part of its early Covid-19 pandemic defensive actions in the prior year which will be settled across FY21 and FY22. The Group generally continues to have high levels of adjusted EBITDA to cash conversion.
The reported net cashflow was an outflow of £12.2m (2020: inflow of £23.7m) due in the main to net debt repayments during the year of £19.4m (2020: net debt drawdown £12.8m). Free cashflow at 31 October 2021 was £7.1m (2020: £11.2m). Free cashflow has decreased in the year due to the VAT effect referred to above.
| FY21 | FY20 | ||
| £000 | £000 | ||
| Net cashflow | (12,068) | 23,683 | |
| Add back: | |||
| Acquisitions / disposals | (139) | 200 | |
| Debt repayments | 35,000 | 25,762 | |
| Drawdowns | (15,600) | (38,575) | |
| Net cost of staff share schemes / (Issue of shares) | (64) | 118 | |
| Free cashflow | 7,129 | 11,188 |
The Group ended the year with net debt of £8.1m (2020: £16.1m), a significant improvement on the previous year. Net debt comprised cash of £18.3m less bank borrowings of £15.4m and the Maltese listed bond of £11.0m.
In October 2021 the Group extended its facility with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc (the ‘Lenders’) for an additional 18 months, to June 2024. The Group also transitioned from LIBOR to SONIA at this point. The Group’s total signed debt facilities at 31 October 2021 consisted of a revolving credit facility of £35m and £10m accordion.
The Group has carefully assessed the likely impact of the Covid-19 pandemic on the business and our customers. Idox is fundamentally resilient due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. We continue to monitor the situation and adapt our approach as required.
Rob Grubb
Chief Financial Officer
| Consolidated statement of comprehensive income | |||||
| Restated* | |||||
| Note | 2021 | 2020 | |||
| £000 | £000 | ||||
| Continuing operations | |||||
| Revenue | 3 | 62,185 | 57,284 | ||
| Cost of sales | (17,130) | (14,752) | |||
| Gross profit | 45,055 | 42,532 | |||
| Administrative expenses | (37,415) | (38,540) | |||
| Operating profit | 7,640 | 3,992 | |||
| Analysed as: | |||||
| Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs | 3 | 19,519 | 17,238 | ||
| Depreciation | (1,581) | (1,498) | |||
| Amortisation | (8,623) | (8,565) | |||
| Restructuring costs | 90 | (1,748) | |||
| Acquisition costs | 134 | (125) | |||
| Financing costs | (110) | (306) | |||
| Share option costs | (1,789) | (1,004) | |||
| Finance income | 818 | 181 | |||
| Finance costs | (1,190) | (2,358) | |||
| Profit before taxation | 7,268 | 1,815 | |||
| Income tax charge | (1,237) | (1,338) | |||
| Profit for the year from continuing operations | 6,031 | 477 | |||
| Discontinued operations | |||||
| Profit for the year from discontinued operations | 4 | 5,918 | 799 | ||
| Profit for the year attributable to the owners of the parent | 11,949 | 1,276 | |||
| Other comprehensive loss for the year
Items that will be reclassified subsequently to profit or loss: Exchange movements on translation of foreign operations net of tax |
(108) | (97) | |||
| Other comprehensive loss for the year, net of tax | (108) | (97) | |||
| Total comprehensive profit for the year | 11,841 | 1,179 | |||
| Total comprehensive profit for the year attributable to owners of the parent | 11,841 | 1,179 | |||
| From continuing operations | |||||
| Basic | 5 | 1.37p | 0.11p | ||
| Diluted | 5 | 1.34p | 0.11p | ||
| From continuing and discontinued operations | |||||
| Basic | 5 | 2.71p | 0.29p | ||
| Diluted | 5 | 2.65p | 0.29p | ||
*The comparatives have been restated due to the Content business being reclassified as discontinued operations. There has been no change to the overall results.
The accompanying accounting policies and notes form an integral part of these financial statements.
| Consolidated balance sheet | |||||||
| Note | 2021 | 2020 | |||||
| £000 | £000 | ||||||
| ASSETS | |||||||
| Non-current assets | |||||||
| Property, plant and equipment | 1,307 | 1,183 | |||||
| Intangible assets | 6 | 92,025 | 81,652 | ||||
| Right-of-use-assets | 2,363 | 3,726 | |||||
| Investment | – | 18 | |||||
| Deferred tax assets | 2,623 | 1,111 | |||||
| Total non-current assets | 98,318 | 87,690 | |||||
| Current assets | |||||||
| Trade and other receivables | 16,968 | 18,700 | |||||
| Current tax receivable | – | 1,117 | |||||
| Cash and cash equivalents | 18,283 | 30,812 | |||||
| Total current assets | 35,251 | 50,629 | |||||
| Total assets | 133,569 | 138,319 | |||||
| LIABILITIES | |||||||
| Current liabilities | |||||||
| Trade and other payables | 8,075 | 6,084 | |||||
| Deferred consideration | 2,070 | 57 | |||||
| Current tax payable | 1,399 | – | |||||
| Other liabilities | 23,547 | 26,839 | |||||
| Provisions | 1,433 | 1,261 | |||||
| Lease liabilities | 727 | 1,188 | |||||
| Total current liabilities | 37,251 | 35,429 | |||||
| Non-current liabilities | |||||||
| Deferred tax liabilities | 5,579 | 3,907 | |||||
| Deferred consideration | 841 | 27 | |||||
| Lease liabilities | 1,747 | 2,695 | |||||
| Other liabilities | 949 | 1,791 | |||||
| Provisions | – | 612 | |||||
| Bonds in issue | 10,998 | 11,848 | |||||
| Borrowings | 15,394 | 35,052 | |||||
| Total non-current liabilities | 35,508 | 55,932 | |||||
| Total liabilities | 72,759 | 91,361 | |||||
| Net assets | 60,810 | 46,958 | |||||
| EQUITY | |||||||
| Called up share capital | 4,469 | 4,450 | |||||
| Capital redemption reserve | 1,112 | 1,112 | |||||
| Share premium account | 41,556 | 41,356 | |||||
| Treasury reserve | (594) | (621) | |||||
| Share option reserve | 3,962 | 2,618 | |||||
| Other reserves | 8,789 | 7,528 | |||||
| ESOP trust | (417) | (373) | |||||
| Foreign currency translation reserve | (189) | (161) | |||||
| Retained earnings / (accumulated losses) | 2,122 | (8,951) | |||||
| Total equity attributable to the owners of the parent | 60,810 | 46,958 | |||||
The financial statements were approved by the Board of Directors and authorised for issue on 26 January 2022 and are signed on its behalf by:
David Meaden Rob Grubb
Chief Executive Officer Chief Financial Officer
The accompanying accounting policies and notes form an integral part of these financial statements.
Company name: Idox plc Company number: 03984070
| Consolidated statement of changes in equity | |||||||||||
| Called up share capital £000 |
Capital redemption reserve
£000 |
Share premium account
£000 |
Treasury reserve
£000 |
Share option reserve £000 |
Other reserves £000 |
ESOP trust
£000 |
Foreign currency translation reserve £000 |
Retained earnings / (accumulated losses) £000 |
Non-controlling interest £000 |
Total
£000 |
|
| Balance at 1 November 2019 | 4,446 | 1,112 | 41,348 | (621) | 1,837 | 7,528 | (365) | (64) | (10,500) | (110) | 44,611 |
| Issue of share capital | 4 | – | 8 | – | – | – | – | – | – | – | 12 |
| Share option costs | – | – | – | – | 1,054 | – | – | – | – | – | 1,054 |
| Exercise / lapses of share options | – | – | – | – | (273) | – | – | – | 273 | – | – |
| ESOP trust | – | – | – | – | – | – | (8) | – | – | – | (8) |
| Disposal of investment | – | – | – | – | – | – | – | – | – | 110 | 110 |
| Transactions with owners and non-controlling interests | 4 | – | 8 | – | 781 | – | (8) | – | 273 | 110 | 1,168 |
| Profit for the year | – | – | – | – | – | – | – | – | 1,276 | – | 1,276 |
| Other comprehensive loss | |||||||||||
| Exchange movement on translation of foreign operations | – | – | – | – | – | – | – | (97) | – | – | (97) |
| Total comprehensive (loss) / profit for the year | – | – | – | – | – | – | – | (97) | 1,276 | – | 1,179 |
| Balance at 31 October 2020 | 4,450 | 1,112 | 41,356 | (621) | 2,618 | 7,528 | (373) | (161) | (8,951) | – | 46,958 |
| Issue of share capital | 19 | – | 200 | – | – | – | – | – | – | – | 219 |
| Share option costs | – | – | – | – | 1,894 | – | – | – | – | – | 1,894 |
| Exercise / lapses of share options | – | – | – | 27 | (550) | – | – | – | 535 | – | 12 |
| ESOP trust | – | – | – | – | – | – | (44) | – | – | – | (44) |
| Fair value of deferred consideration shares on purchase of subsidiary | – | – | – | – | – | 1,261 | – | – | – | – | 1,261 |
| Equity dividends paid | – | – | – | – | – | – | – | – | (1,331) | – | (1,331) |
| Transactions with owners | 19 | – | 200 | 27 | 1,344 | 1,261 | (44) | – | (796) | – | 2,011 |
| Profit for the year | – | – | – | – | – | – | – | – | 11,949 | – | 11,949 |
| Other comprehensive loss | |||||||||||
| Recycled exchange movements on disposal of subsidiaries | – | – | – | – | – | – | – | 80 | (80) | – | – |
| Exchange movement on translation of foreign operations | – | – | – | – | – | – | – | (108) | – | – | (108) |
| Total comprehensive (loss) / profit for the year | – | – | – | – | – | – | – | (28) | 11,869 | – | 11,841 |
| Balance at 31 October 2021 | 4,469 | 1,112 | 41,556 | (594) | 3,962 | 8,789 | (417) | (189) | 2,122 | – | 60,810 |
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated cashflow statement
| Note | 2021 | 2020 | |||
| £000 | £000 | ||||
| Cash flows from operating activities | |||||
| Profit for the year before taxation | 13,186 | 2,702 | |||
| Adjustments for: | |||||
| Depreciation of property, plant and equipment | 801 | 817 | |||
| Depreciation of right-of-use assets | 1,021 | 1,240 | |||
| Amortisation of intangible assets | 8,835 | 9,282 | |||
| (Gain) / loss on disposal / purchase of subsidiary | (6,679) | 380 | |||
| Finance income | (800) | (5) | |||
| Finance costs | 1,060 | 2,210 | |||
| Debt issue costs amortisation | 144 | 189 | |||
| Research and development tax credit | (267) | (134) | |||
| Share option costs | 1,908 | 1,057 | |||
| Loss on disposal of leases | – | 36 | |||
| Movement in stock | – | 54 | |||
| Movement in receivables | 3,086 | 1,192 | |||
| Movement in payables | (5,947) | 4,329 | |||
| Cash generated by operations | 16,348 | 23,349 | |||
| Tax refunded / (tax paid) | 206 | (2,000) | |||
| Net cash from operating activities | 16,554 | 21,349 | |||
| Cash flows from investing activities | |||||
| Acquisition of subsidiaries | (10,530) | – | |||
| Disposal of subsidiaries | 10,669 | (200) | |||
| Purchase of property, plant and equipment | (1,110) | (931) | |||
| Purchase of intangible assets | (4,637) | (5,998) | |||
| Finance income | 66 | 5 | |||
| Net cash used in investing activities | (5,542) | (7,124) | |||
| Cash flows from financing activities | |||||
| Interest paid | (967) | (1,644) | |||
| New loans | 15,600 | 38,575 | |||
| Loan related costs | (292) | (48) | |||
| Loan repayments | (35,000) | (25,762) | |||
| Principal lease payments | (1,154) | (1,545) | |||
| Equity dividends paid | (1,331) | – | |||
| Issue of own shares | 64 | (118) | |||
| Net cash (outflows) / inflows from financing activities | (23,080) | 9,458 | |||
| Net movement in cash and cash equivalents | (12,068) | 23,683 | |||
| Cash and cash equivalents at the beginning of the year | 30,812 | 7,023 | |||
| Exchange gains on cash and cash equivalents | (461) | 106 | |||
| Cash and cash equivalents at the end of the year | 18,283 | 30,812 |
The accompanying accounting policies and notes form an integral part of these financial statements.
Notes to the condensed financial statements
1 BASIS OF PREPARATION
The financial information contained in these condensed financial statements does not constitute the Group’s statutory accounts within the meaning of the Companies Act 2006.
Statutory accounts for the year ended 31 October 2020 and 31 October 2021 have been reported on, with an unqualified opinion.
Whilst the financial information included in this Annual Financial Report Announcement has been computed in accordance with International Financial Reporting Standards (IFRS) this announcement, due to its condensed nature, does not itself contain sufficient information to comply with IFRS.
This Annual Financial Report Announcement includes note references that refer to notes in this Annual Financial Report Announcement 2021.
Statutory accounts for the year ended 31 October 2020 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 October 2021, prepared under IFRS, are available on the Group’s website: https://www.idoxgroup.com/investors/financial-reporting/ and will be delivered to the Registrar in due course. The Group’s principal accounting policies as set out in the 2020 statutory accounts have been applied consistently in all material respects.
Going Concern
The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered the Group’s budget, cash flow forecasts, available banking facility with appropriate headroom in facilities and financial covenants, and levels of recurring revenue.
In December 2019 the Group had refinanced with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc. The facilities, which comprise a revolving credit facility of £35,000,000, were extended during the year and are committed until June 2024.
Idox along with most companies has been impacted by the Covid-19 pandemic, however the impact on our Group has in the main been limited to the initial disruption of the early stages of the emerging challenges in 2020, including restrictions on physical movement. We have largely seen our operations return to their pre-Covid 19 pandemic levels across our Group.
We remain cautious in respect of the ongoing impact of the Covid-19 pandemic and associated restrictions but are confident we are fundamentally resilient due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants.
We continue to assess the impact of the Covid-19 pandemic on the business, taking actions to mitigate or limit the impacts on our organisation where we can and supporting our staff, customers and partners in dealing with the ongoing impacts which are largely in respect of associated restrictions.
As part of the preparation of our FY21 results, the Group has performed detailed financial forecasting, as well as severe stress-testing in our financial modelling, but have not identified any credible scenarios that would cast doubt on our ability to continue as a going concern.
The Group has performed sensitivity analysis of financial modelling to identify what circumstances could lead to liquidity challenges. This forecasting has demonstrated that the Group would only breach its banking covenants in the most severe of circumstances which are not considered credible. Under this sensitivity analysis, recurring revenues renewals were assumed to be 37% lower than plan and non-recurring revenues won and delivered lower by 74%, with no corresponding action on costs to address these shortfalls. Under this scenario, the Group would likely be in breach of its banking covenants during FY22, albeit liquidity even in this extreme scenario remains strong. This scenario is not considered credible given the growth the Group has experienced in FY20 and FY21 in recurring and non-recurring revenues despite the impact of the Covid-19 pandemic.
Therefore, this supports the going concern assessment for the business.
The Annual Financial Report Announcement was approved by the Board of Directors on 26 January 2022 and signed on its behalf by David Meaden and Rob Grubb.
2 RESPONSIBILITY STATEMENTS UNDER THE DISCLOSURE AND TRANSPARENCY RULES
The Directors confirm that:
- the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
- the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
- the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company’s position and performance, business model and strategy.
The name and function of each of the Directors for the year ended 31 October 2021 are set out in the Annual Financial Report 2021.
3 SEGMENTAL ANALYSIS
During the year ended 31 October 2021, the Group was organised into three operating segments, which are detailed below.
Financial information is reported to the chief operating decision maker, which comprises the Chief Executive Officer and the Chief Financial Officer, monthly on a business unit basis with revenue and operating profits split by business unit. Each business unit is deemed an operating segment as each offers different products and services.
- Public Sector Software (PSS) – delivering specialist information management solutions and services to the public sector.
- Engineering Information Management (EIM) – delivering engineering document management and control solutions to asset intensive industry sectors.
- Content (CONT) – delivering funding and compliance solutions to corporate, public and commercial customers. The entities comprising this segment were fully disposed in the year ended 31 October 2021, and the results which have been consolidated under the Group’s ownership have been disclosed as Discontinued operations in these financial statements.
Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before the allocation of taxation, Group interest payments and Group acquisition costs. The assets and liabilities of the Group are not reviewed by the chief operating decision maker on a segment basis. The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue.
The segment revenues by geographic location are as follows:
| Continuing £000 |
Discontinued £000 |
Total Group £000 |
||||
| 2021: Revenues from external customers | ||||||
| United Kingdom | 52,038 | 46 | 52,084 | |||
| USA | 5,181 | 27 | 5,208 | |||
| Europe | 4,275 | 3,824 | 8,099 | |||
| Rest of World | 691 | – | 691 | |||
| 62,185 | 3,897 | 66,082 |
| Continuing £000 |
Discontinued £000 |
Total Group £000 |
||||
| 2020: Revenues from external customers | ||||||
| United Kingdom | 47,572 | 328 | 47,900 | |||
| USA | 5,913 | 193 | 6,106 | |||
| Europe | 2,589 | 10,212 | 12,801 | |||
| Rest of World | 1,210 | – | 1,210 | |||
| 57,284 | 10,733 | 68,017 |
Revenues are attributed to individual countries on the basis of the location of the customer.
The segment revenues by type are as follows:
| Continuing £000 |
Discontinued £000 |
Total Group £000 |
|||||
| 2021: Revenues by type | |||||||
| Recurring revenues – PSS | 30,111 | – | 30,111 | ||||
| Recurring revenues – EIM | 6,139 | – | 6,139 | ||||
| Recurring revenues – Content | – | 604 | 604 | ||||
| Recurring revenues | 36,250 | 604 | 36,854 | ||||
| Non-recurring revenues – PSS | 24,003 | – | 24,003 | ||||
| Non-recurring revenues – EIM | 1,932 | – | 1,932 | ||||
| Non-recurring revenues – Content | – | 3,293 | 3,293 | ||||
| Non-recurring revenues | 25,935 | 3,293 | 29,228 | ||||
| 62,185 | 3,897 | 66,082 | |||||
| Revenue from sale of goods | 23,940 | 1,220 | 25,160 | ||||
| Revenue from rendering of services | 38,245 | 2,677 | 40,922 | ||||
| 62,185 | 3,897 | 66,082 | |||||
| Continuing £000 |
Discontinued £000 |
Total Group £000 |
|||||
| 2020: Revenues by type | |||||||
| Recurring revenues – PSS | 28,863 | – | 28,863 | ||||
| Recurring revenues – EIM | 6,886 | – | 6,886 | ||||
| Recurring revenues – Software | 35,749 | – | 35,749 | ||||
| Recurring revenues – Content | – | 1,626 | 1,626 | ||||
| Recurring revenues | 35,749 | 1,626 | 37,375 | ||||
| Non-recurring revenues – PSS | 19,563 | – | 19,563 | ||||
| Non-recurring revenues – EIM | 1,972 | – | 1,972 | ||||
| Non-recurring revenues – Software | 21,535 | – | 21,535 | ||||
| Non-recurring revenues – Content | – | 9,107 | 9,107 | ||||
| Non-recurring revenues | 21,535 | 9,107 | 30,642 | ||||
| 57,284 | 10,733 | 68,017 | |||||
| Revenue from sale of goods | 19,144 | 3,158 | 22,302 | ||||
| Revenue from rendering of services | 38,140 | 7,575 | 45,715 | ||||
| 57,284 | 10,733 | 68,017 | |||||
Recurring revenue is income generated from customers on an annual contractual basis. Recurring revenue amounts to approximately 58% (2020: 62%) of continuing revenue, which is revenue generated annually from sales to existing customers.
All revenues are recognised over the period of the contract, unless the only performance obligation is to license or re-license a customer’s existing user without any further obligations, in which case the revenue is recognised upon completion of the obligation.
All contracts are issued with commercial payment terms without any unusual financial or deferred arrangements and do not include any amounts of variable consideration that are constrained.
The Group’s total outstanding contracted performance obligations at 31 October 2021 was £53,897,000 and it is anticipated that 64% of this will be recognised as revenue in FY22 and 22% in FY23.
The segment results by business unit for the year ended 31 October 2021:
| PSS
£000 |
EIM
£000 |
Continuing Operations Total £000 |
Discontinued Operations CONTENT £000 |
Total
£000 |
|
| Revenue | 54,114 | 8,071 | 62,185 | 3,897 | 66,082 |
| Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs | 17,969 | 1,550 | 19,519 | 276 | 19,795 |
| Depreciation | (751) | (36) | (787) | (14) | (801) |
| Depreciation – right-of-use-assets | (709) | (85) | (794) | (227) | (1,021) |
| Amortisation – software licences, customer lists, order backlog and R&D | (4,193) | (869) | (5,062) | (46) | (5,108) |
| Amortisation – acquired intangibles | (3,210) | (351) | (3,561) | (166) | (3,727) |
| Restructuring costs | 98 | (8) | 90 | (11) | 79 |
| Acquisition costs | 134 | – | 134 | – | 134 |
| Share option costs | (1,760) | (29) | (1,789) | (119) | (1,908) |
| Segment operating profit / (loss) | 7,578 | 172 | 7,750 | (307) | 7,443 |
| Financing costs | (110) | – | (110) | ||
| Operating profit / (loss) | 7,640 | (307) | 7,333 | ||
| Gain from sale of discontinued operations | – | 6,239 | 6,239 | ||
| Finance income | 818 | – | 818 | ||
| Finance costs | (1,190) | (14) | (1,204) | ||
| Profit before taxation | 7,268 | 5,918 | 13,186 |
The corporate recharge to the business unit EBITDA is allocated on a head count basis with the exception of Content, which has had corporate costs reduced to avoid stranded costs.
The segment results by business unit for the year ended 31 October 2019:
| PSS
£000 |
EIM
£000 |
Continuing Operations Total £000 |
Discontinued Operations CONTENT* £000 |
Total
£000 |
|
| Revenue | 48,426 | 8,858 | 57,284 | 10,733 | 68,017 |
| Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs | 15,536 | 1,702 | 17,238 | 2,346 | 19,584 |
| Depreciation | (708) | (83) | (791) | (26) | (817) |
| Depreciation – right-of-use-assets | (618) | (89) | (707) | (533) | (1,240) |
| Amortisation – software licences, customer lists, order backlog and R&D | (3,803) | (752) | (4,555) | (270) | (4,825) |
| Amortisation – acquired intangibles | (3,570) | (440) | (4,010) | (447) | (4,457) |
| Restructuring costs | (1,652) | (96) | (1,748) | (90) | (1,838) |
| Acquisition costs | (125) | – | (125) | – | (125) |
| Share option costs | (1,004) | – | (1,004) | (53) | (1,057) |
| Segment operating profit | 4,056 | 242 | 4,298 | 927 | 5,225 |
| Financing costs | (306) | – | (306) | ||
| Operating profit | 3,992 | 927 | 4,919 | ||
| Finance income | 181 | – | 181 | ||
| Finance costs | (2,358) | (40) | (2,398) | ||
| Profit before taxation | 1,815 | 887 | 2,702 |
*Corporate costs for Idox Content have been reduced by £1,349,000 to better reflect the actual reduction in Corporate costs as a result of the discontinued operations. These costs have been allocated to PSS and EIM on a headcount basis.
4 DISCONTINUED OPERATIONS
During the first six months of the financial year, the Group received separate offers to acquire its Continental Compliance operations, and its Netherlands Grants Consultancy operations. These operations collectively comprised the Idox Content division of the Group. These offers were at an acceptable valuation and given the Group’s desire to prioritise capital on its Idox Software operation, these disposals were completed in the year.
The Continental Compliance operations were disposed on 12 March 2021 and the Netherlands Grants Consultancy operations were disposed on 6 April 2021. These dates represent the point the control and legal ownership of these operations passed to the acquirers.
The results of the discontinued operations, which have been excluded in the consolidated income statement, were as follows:
| 2021 | 2020 | ||
| £000 | £000 | ||
| Revenue | 3,897 | 10,733 | |
| Expenses | (4,218) | (9,846) | |
| Gain on Disposal | 6,239 | – | |
| Profit before tax | 5,918 | 887 | |
| Attributable tax expense | – | (88) | |
| Net profit attributable to discontinued operations | 5,918 | 799 | |
During the year, Content contributed £2.7m (2020: £1.6m) to the Group’s net operating cash flows and contributed £10.7m (2020: £Nil) in respect of investing and financing activities.
5 EARNINGS PER SHARE
The earnings per ordinary share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows:
| Continuing Operations | 2021 | 2020 | ||
| £000 | £000 | |||
| Profit for the year | 6,031 | 477 | ||
| Basic earnings per share | ||||
| Weighted average number of shares in issue | 440,376,576 | 439,245,132 | ||
| Basic earnings per share | 1.37p | 0.11p | ||
| Weighted average number of shares in issue | 440,376,576 | 439,245,132 | ||
| Add back: | ||||
| Dilutive share options | 10,749,077 | 7,279,721 | ||
| Weighted average allotted, called up and fully paid share capital | 451,125,653 | 446,524,853 | ||
| Diluted earnings per share | ||||
| Diluted earnings per share | 1.34p | 0.11p | ||
| Adjusted earnings per share | 2021 £000 |
2020 £000 |
|
| Profit for the year | 6,031 | 477 | |
| Add back: | |||
| Amortisation on acquired intangibles | 3,561 | 4,010 | |
| Acquisition costs | (134) | 125 | |
| Restructuring costs | (90) | 1,748 | |
| Financing costs | 110 | 306 | |
| Share option costs | 1,789 | 1,004 | |
| Tax rate changes | 826 | – | |
| Tax effect | (1,841) | (1,094) | |
| Adjusted profit for year | 10,252 | 6,576 | |
| Weighted average number of shares in issue – basic | 440,376,576 | 439,245,132 | |
| Weighted average number of shares in issue – diluted | 451,125,653 | 446,524,853 | |
| Adjusted earnings per share | 2.33p | 1.50p | |
| Adjusted diluted earnings per share | 2.27p | 1.47p |
| Discontinued Operations | 2021 | 2020 | ||
| £000 | £000 | |||
| Profit for the year | 5,918 | 799 | ||
| Basic earnings per share | ||||
| Weighted average number of shares in issue | 440,376,576 | 439,245,132 | ||
| Basic earnings per share | 1.34p | 0.18p | ||
| Weighted average number of shares in issue | 440,376,576 | 439,245,132 | ||
| Add back: | ||||
| Dilutive share options | 10,749,077 | 7,279,721 | ||
| Weighted average allotted, called up and fully paid share capital | 451,125,653 | 446,524,853 | ||
| Diluted earnings per share | ||||
| Diluted earnings per share | 1.31p | 0.18p | ||
| Total Operations | 2021 | 2020 | ||
| £000 | £000 | |||
| Profit for the year | 11,949 | 1,276 | ||
| Basic earnings per share | ||||
| Weighted average number of shares in issue | 440,376,576 | 439,245,132 | ||
| Basic earnings per share | 2.71p | 0.29p | ||
| Weighted average number of shares in issue | 440,376,576 | 439,245,132 | ||
| Add back: | ||||
| Dilutive share options | 10,749,077 | 7,279,721 | ||
| Weighted average allotted, called up and fully paid share capital | 451,125,653 | 446,524,853 | ||
| Diluted earnings per share | ||||
| Diluted earnings per share | 2.65p | 0.29p | ||
| Adjusted earnings per share | 2021 £000 |
2020 £000 |
|
| Profit for the year | 11,949 | 1,276 | |
| Add back: | |||
| Amortisation on acquired intangibles | 3,727 | 4,457 | |
| Acquisition costs | (134) | 125 | |
| Restructuring costs | (6,318) | 1,838 | |
| Financing costs | 110 | 306 | |
| Share option costs | 1,908 | 1,057 | |
| Tax rate changes | 826 | – | |
| Tax effect | (1,911) | (1,122) | |
| Adjusted profit for year | 10,157 | 7,937 | |
| Weighted average number of shares in issue – basic | 440,376,576 | 439,245,132 | |
| Weighted average number of shares in issue – diluted | 451,125,653 | 446,524,853 | |
| Adjusted earnings per share | 2.31p | 1.81p | |
| Adjusted diluted earnings per share | 2.25p | 1.78p |
6 INTANGIBLE ASSETS
| Goodwill | Customer relation-ships | Trade names | Software | Develop-ment costs | Order backlog | Customer lists | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| Cost | ||||||||
| At 1 November 2019 | 79,841 | 31,958 | 12,593 | 22,687 | 19,288 | 320 | 273 | 166,960 |
| Foreign exchange | – | – | – | (9) | 27 | (8) | 5 | 15 |
| Additions | – | – | – | 380 | 4,672 | – | – | 5,052 |
| Fair value | (113) | – | – | – | – | – | – | (113) |
| At 31 October 2020 | 79,728 | 31,958 | 12,593 | 23,058 | 23,987 | 312 | 278 | 171,914 |
| Foreign exchange | – | – | – | (1) | (88) | (10) | (18) | (117) |
| Additions | – | – | – | 56 | 4,588 | – | – | 4,644 |
| Additions on acquisition | 7,775 | 5,808 | – | 6,192 | 422 | – | – | 20,197 |
| Disposals | (4,893) | (2,920) | (877) | (906) | (870) | – | (260) | (10,726) |
| At 31 October 2021 | 82,610 | 34,846 | 11,716 | 28,399 | 28,039 | 302 | – | 185,912 |
| Amortisation | ||||||||
| At 1 November 2019 | 31,709 | 19,142 | 8,565 | 12,565 | 8,558 | 258 | 159 | 80,956 |
| Foreign exchange | – | – | – | (9) | 29 | (7) | 11 | 24 |
| Amortisation for the year | – | 1,685 | 675 | 2,998 | 3,755 | 61 | 108 | 9,282 |
| At 31 October 2020 | 31,709 | 20,827 | 9,240 | 15,554 | 12,342 | 312 | 278 | 90,262 |
| Foreign exchange | – | – | – | (1) | (78) | (10) | (18) | (107) |
| Amortisation for the year | – | 1,321 | 612 | 2,676 | 4,226 | – | – | 8,835 |
| Disposals | – | (2,530) | (762) | (775) | (776) | – | (260) | (5,103) |
| At 31 October 2021 | 31,709 | 19,618 | 9,090 | 17,454 | 15,714 | 302 | – | 93,887 |
| Carrying amount at 31 October 2021 | 50,901 | 15,228 | 2,626 | 10,945 | 12,325 | – | – | 92,025 |
| Carrying amount at 31 October 2020 | 48,019 | 11,131 | 3,353 | 7,504 | 11,645 | – | – | 81,652 |
| Average remaining amortisation period (years) | ||||||||
| 31 October 2021 | n/a | 12.0 | 4.3 | 3.8 | 2.9 | – | – | |
| 31 October 2020 | n/a | 6.6 | 5.0 | 2.5 | 3.1 | – | – | |
During the year, goodwill and intangibles were reviewed for impairment in accordance with IAS 36, ‘Impairment of Assets’. An impairment charge of £Nil (2020: £Nil) was processed in the year.
Fair value adjustments are in relation to the finalisation of acquisition accounting in respect of Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd.
Impairment test for goodwill
For this review, goodwill was allocated to individual Cash Generating Units (CGUs) on the basis of the Group’s operations as disclosed in the segmental analysis. As the Board reviews results on a segmental level, the Group monitors goodwill on the same basis.
The carrying value of goodwill by each CGU is as follows:
| 2021 | 2020 | |
| Cash Generating Units | £000 | £000 |
| Public Sector Software (PSS) | 40,927 | 30,624 |
| Engineering Information Management (EIM) | 9,974 | 9,974 |
| Idox Content (discontinued) | – | 7,421 |
| 50,901 | 48,019 |
The recoverable amount of all CGUs has been determined using value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering the next five financial years. The key assumptions used in the financial budgets relate to revenue and EBITDA growth targets. Cash flows beyond this period are extrapolated using the estimated growth rates stated below. Growth rates are reviewed in line with historic actuals to ensure reasonableness and are based on an increase in market share.
For value-in-use calculations, the growth rates and margins used to estimate future performance are based on financial year 2022 budgets (as approved by the Board) which is management’s best estimate of short-term performance based on an assessment of market opportunities and macro-economic conditions. In the year to 31 October 2021, the Weighted Average Cost of Capital for each CGU has been used as an appropriate discount rate to apply to cash flows. The same basis was used in the year to 31 October 2020.
The assumptions used for the value-in-use calculations are as follows and are considered appropriate for each of the risk profiles of the respective CGUs:
| Cash Generating Units | Discount rate Current year |
Compound Annual Growth Rate | Long term growth rate Current year |
Discount rate Prior year |
Growth rate Prior year |
| PSS | 12.4% | 4.2% | 1.7% | 11.8% | 1.5% |
| EIM | 13.5% | (0.1)% | 1.7% | 12.7% | 1.5% |
| Idox Content (discontinued) | – | – | – | 12.7% | 1.5% |
Individual Weighted Average Costs of Capital were calculated for each CGU and adjusted for the market’s assessment of the risks attaching to each CGUs cash flows. The Weighted Average Cost of Capital is recalculated at each period end.
Management considered the level of intangible assets within the Group in comparison to the future budgets and have processed an impairment charge of £Nil within the year (2020: £Nil).
Management have specifically considered the past financial performance of the EIM CGU which has seen revenue decreases following market challenges in the Oil and Gas sectors, compounded by the Covid-19 pandemic and its impact on global consumption in FY20 and FY21 following various periods of domestic lockdowns. Reported EIM revenues have also been impacted by new business being on a SaaS basis compared to previous periods that recorded larger on-premise enterprise license sales. However, the business has benefitted from the reorganisation of the Group in the past three years, with adjusted EBITDA contribution (i.e., before allocation of corporate expenses) up in FY19, FY20 and FY21, achieving a CAGR of 17%. Management anticipates a return to revenue growth in FY22 following the easing of lockdown restrictions and improvement in global supply, and following implementation of a more focused go-to-market approach established from a strategic review completed in late FY21. In the event the EIM CGU does not achieve revenue growth in FY22 as anticipated, this may give rise to an impairment in the carrying value of the EIM CGU assets.
The Group has conducted sensitivity analysis on the impairment test of each CGU and the group of units carrying value. Sensitivities have been run on the discount rate applied and management are satisfied that a reasonable increase in the discount rate used would not lead to the carrying amount of each CGU exceeding the recoverable amount.
Sensitivities have also been run on cash flow forecasts for all CGUs EBITDA by 10%. Management are satisfied that this change would not lead to the carrying amount of each CGU exceeding the recoverable amount. Sensitivities have also been run on cash flow forecasts for all CGUs reducing the growth rate to 0%. Management are satisfied that this change would not lead to the carrying amount of each CGU exceeding the recoverable amount. In relation to EIM, in the event a combination of all the sensitivities occur, this could give rise to an impairment; however, the Directors have concluded the likelihood of this is remote.
Management have further considered the CGUs for which prior period impairments were recorded to reduce the value-in-use of those CGUs to their recoverable amount, and how such carrying values are subject to the current year sensitivities noted above.
Whilst the current year impairment reviews and sensitivities have not provided any indicators of further impairment on these assets, management have considered whether a reversal of the prior period impairment is required and concluded this is not appropriate at this time due to the ongoing transformation and improvement of those businesses.
7 ACQUISITIONS
Aligned Assets
On 5 June 2021, the Group acquired the entire share capital of Aligned Assets.
Aligned Assets has provided software solutions to local authorities and a range of other public and private sectors for Address Management Solutions for over 20 years and adds to the Group’s existing portfolio of local government focussed solutions which focus on built environment, public protection, transport, elections, and social care.
Goodwill arising on the acquisition of Aligned Assets has been capitalised and consists largely of the value of the synergies and economies of scale expected from combining the operations of Aligned Assets with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of Aligned Assets has been accounted for using the acquisition method of accounting.
| Book value £000 |
Fair value £000 |
||
| Intangible Assets | 3,424 | – | |
| Property, plant and equipment | 104 | 46 | |
| Trade receivables | 394 | 394 | |
| Other receivables | 184 | 258 | |
| Cash at bank | 367 | 367 | |
| Total Assets | 4,473 | 1,065 | |
| Trade payables | (71) | (71) | |
| Other liabilities | (804) | (211) | |
| Contract liabilities | (1,362) | (1,527) | |
| Social security and other taxes | (111) | (111) | |
| Deferred tax liability | (7) | (1,691) | |
| Total Liabilities | (2,355) | (3,611) | |
| Net Assets | (2,546) | ||
| Goodwill arising on acquisition | 5,609 | ||
| Purchased customer relationships capitalised | 3,822 | ||
| Purchased software capitalised | 3,194 | ||
| Total consideration | 10,079 | ||
| Satisfied by: | |||
| Cash to vendor | 7,557 | ||
| Earnout consideration | 2,522 | ||
| 10,079 |
The revenue included in the consolidated statement of comprehensive income since 5 June 2021 contributed by Aligned Assets was £1,229,000. Aligned Assets also made a profit after tax of £537,000 for the same period. If Aligned Assets had been included from 1 November 2020, it would have contributed £3,289,000 to Group revenue and a profit after tax of £1,353,000.
Acquisition costs of £165,000 have been written off in the consolidated statement of comprehensive income.
thinkWhere
On 6 August 2021, the Group acquired the entire share capital of thinkWhere.
thinkWhere provides end to end GIS systems using open source, cloud-based products and applications, providing unique access to a wealth of open datasets supported by professional consulting services. thinkWhere will help build capability and new opportunities for both our customers and products. Having previously been equally owned by Falkirk and Stirling Councils, the acquisition will provide thinkWhere and its staff with the investment and resources to scale and accelerate as part of Idox.
We were able to complete the purchase of thinkWhere Limited for £1 as the funding requirements that the company was placing on Stirling and Falkirk councils was deemed to be too high. The purchase of thinkWhere has been accounted for using the acquisition method of accounting.
| Book value £000 |
Fair value £000 |
||
| Intangible Assets | 322 | 421 | |
| Trade receivables | 36 | 36 | |
| Other receivables | 114 | 114 | |
| Cash at bank | (24) | (24) | |
| Total Assets | 448 | 547 | |
| Trade payables | (50) | (50) | |
| Other liabilities | (69) | (69) | |
| Contract liabilities | (261) | (261) | |
| Social security and other taxes | (128) | (128) | |
| Deferred tax liability | 185 | 119 | |
| Total Liabilities | (323) | (389) | |
| Net Assets | 158 | ||
| Gain on acquisition | (440) | ||
| Purchased customer relationships capitalised | 157 | ||
| Purchased software capitalised | 125 | ||
| Total consideration | – |
The revenue included in the consolidated statement of comprehensive income since 6 August 2021 contributed by thinkWhere was £174,000. thinkWhere also made a loss after tax of £42,000 for the same period. If thinkWhere had been included from 1 November 2020, it would have contributed £694,000 to Group revenue and a loss after tax of £168,000.
Acquisition costs of £35,000 have been written off in the consolidated statement of comprehensive income.
exeGesIS
On 4 October 2021, the Group acquired the entire share capital of exeGesIS.
exeGesIS provides both public and private sectors software which helps collect information and manage assets of ecological, environmental and historical importance. The company works with private organisations, local authorities and other public sector bodies who manage public rights-of-way, archaeological sites, historic assets, conservation areas and nature reserves. This customer base is complementary to Idox’s and brings a number of new clients into the Group.
Goodwill arising on the acquisition of exeGesIS has been capitalised and consists largely of the value of the synergies and economies of scale expected from combining the operations of exeGesIS with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of exeGesIS has been accounted for using the acquisition method of accounting.
| Book value £000 |
Fair value £000 |
||
| Property, plant and equipment | 14 | 11 | |
| Trade receivables | 366 | 366 | |
| Other receivables | 9 | 9 | |
| Cash at bank | 2,033 | 2,033 | |
| Total Assets | 2,422 | 2,419 | |
| Trade payables | (34) | (34) | |
| Other liabilities | (404) | (565) | |
| Contract liabilities | (779) | (779) | |
| Social security and other taxes | (13) | (13) | |
| Deferred tax liability | (2) | (2) | |
| Total Liabilities | (1,232) | (1,393) | |
| Net Assets | 1,026 | ||
| Goodwill arising on acquisition | 2,166 | ||
| Purchased customer relationships capitalised | 1,829 | ||
| Purchased software capitalised | 2,873 | ||
| Total consideration | 7,894 | ||
| Satisfied by: | |||
| Cash to vendor | 6,244 | ||
| Earnout consideration | 1,650 | ||
| 7,894 | |||
The revenue included in the consolidated statement of comprehensive income since 4 October 2021 contributed by exeGesIS was £224,000. exeGesIS also made a profit after tax of £91,000 for the same period. If exeGesIS had been included from 1 November 2020, it would have contributed £2,686,000 to Group revenue and a profit after tax of £1,095,000.
The purchase price allocation between goodwill, customer relationships and software is management’s best estimate as a formal valuation has not yet been finalised. Any required reallocations between the categories will be completed within 12 months of acquisitions as permitted by IFRS 3.
Acquisition costs of £102,000 have been written off in the consolidated statement of comprehensive income.
8 POST BALANCE SHEET EVENTS
There have been no post balance sheet events which had a material impact on the Group.
9 ADDITIONAL INFORMATION
Related Party Transactions
No related party transactions have taken place during the year that have materially affected the financial position or performance of the Company.
Principal Risks and Uncertainties
The principal risk and uncertainties facing the Group together with the actions being taken to mitigate them and future potential items for consideration are set out in the Strategic Report section of the Annual Financial Report 2021.
10 ALTERNATIVE PERFORMANCE MEASURES
The Group makes reference to Alternative Performance Measures (APMs) which are not defined or specified under International Reporting Standards. The Group uses these APMs as this is in line with the management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers. Details are included within the financial review section of the Strategic Report.
The following table reconciles these APMs to statutory equivalents for continuing operations:
| 2021 £000 |
2020 £000 |
||
| Adjusted EBITDA: | |||
| Profit before taxation | 7,268 | 1,815 | |
| Depreciation and Amortisation | 10,204 | 10,063 | |
| Restructuring costs | (90) | 1,748 | |
| Acquisition costs | (134) | 125 | |
| Financing costs | 110 | 306 | |
| Share option costs | 1,789 | 1,004 | |
| Net finance costs | 372 | 2,177 | |
| Adjusted EBITDA | 19,519 | 17,238 | |
| Free cashflow: | |||
| Net cashflow | (12,068) | 23,683 | |
| Add back: | |||
| Acquisitions / disposals | (139) | 200 | |
| Debt repayments | 35,000 | 25,762 | |
| Drawdowns | (15,600) | (38,575) | |
| (Issue of shares) / net cost of staff share schemes | (64) | 118 | |
| Free cashflow | 7,129 | 11,188 | |
| Net debt: | |||
| Cash | (18,283) | (30,812) | |
| Bank borrowings | 15,394 | 35,052 | |
| Bonds in issue | 10,998 | 11,848 | |
| Net Debt | 8,109 | 16,088 | |
| Adjusted profit for the year and adjusted earnings per share: | |||
| Profit for the year | 6,031 | 477 | |
| Add back: | |||
| Amortisation on acquired intangibles | 3,561 | 4,010 | |
| Acquisition costs | (134) | 125 | |
| Restructuring costs | (90) | 1,748 | |
| Financing costs | 110 | 306 | |
| Share option costs | 1,789 | 1,004 | |
| Tax rate changes | 826 | – | |
| Tax effect | (1,841) | (1,094) | |
| Adjusted profit for year | 10,252 | 6,576 | |
| Weighted average number of shares in issue – basic | 440,376,576 | 439,245,132 | |
| Weighted average number of shares in issue – diluted | 451,125,653 | 446,524,853 | |
| Adjusted earnings per share | 2.33p | 1.50p | |
| Adjusted diluted earnings per share | 2.27p | 1.47p |
The following table reconciles these APMs to statutory equivalents for total operations:
| 2021 £000 |
2020 £000 |
||
| Adjusted EBITDA: | |||
| Profit before taxation | 13,186 | 2,702 | |
| Depreciation and Amortisation | 10,657 | 11,339 | |
| Restructuring costs | (6,318) | 1,838 | |
| Acquisition costs | (134) | 125 | |
| Financing costs | 110 | 306 | |
| Share option costs | 1,908 | 1,057 | |
| Net finance costs | 386 | 2,217 | |
| Adjusted EBITDA | 19,795 | 19,584 | |
| Free cashflow: | |||
| Net cashflow | (12,068) | 23,683 | |
| Add back: | |||
| Acquisitions / disposals | (139) | 200 | |
| Debt repayments | 35,000 | 25,762 | |
| Drawdowns | (15,600) | (38,575) | |
| (Issue of shares) / net cost of staff share schemes | (64) | 118 | |
| Free cashflow | 7,129 | 11,188 | |
| Net debt: | |||
| Cash | (18,283) | (30,812) | |
| Bank borrowings | 15,394 | 35,052 | |
| Bonds in issue | 10,998 | 11,848 | |
| Net Debt | 8,109 | 16,088 | |
| Adjusted profit for the year and adjusted earnings per share: | |||
| Profit for the year | 11,949 | 1,276 | |
| Add back: | |||
| Amortisation on acquired intangibles | 3,727 | 4,457 | |
| Acquisition costs | (134) | 125 | |
| Restructuring costs | (6,318) | 1,838 | |
| Financing costs | 110 | 306 | |
| Share option costs | 1,908 | 1,057 | |
| Tax rate changes | 826 | – | |
| Tax effect | (1,911) | (1,122) | |
| Adjusted profit for year | 10,157 | 7,937 | |
| Weighted average number of shares in issue – basic | 440,376,576 | 439,245,132 | |
| Weighted average number of shares in issue – diluted | 451,125,653 | 446,524,853 | |
| Adjusted earnings per share | 2.31p | 1.81p | |
| Adjusted diluted earnings per share | 2.25p | 1.78p |