02 December 2022

Mind Gym PLC

("Mind Gym", the "Group" or the "Company")

Half year results for the six months ended 30 September 2022

Significant H1 momentum driving growth

MindGym (AIM: MIND), the global provider of human capital and business improvement solutions, announces its half year results for the six months ended 30 September 2022.

Key Financials

¹Digitally enabled revenue comprises revenue from our digital products and revenue from delivery of virtual sessions.

² Historic balances have been re-stated to include programme management and cancellation fees related to digitally enabled revenues. Virtual delivery revenues below have also been re-stated to include these fees

Overview - financial summary H1 FY23

·      Results in line with management's expectations - H1 FY23 has seen growth on H1 FY22, in both constant and actual currency ('FX') rates, despite the economic uncertainty and exit from Omicron at the start of FY23. FX benefited revenue growth by circa +9%

·      As anticipated, there was a switch back to in-person delivery after COVID, and this meant that Digitally-enabled revenues decreased 7% on prior year:

o  In-person deliveries grew from 4% in H1 FY22 to 15% of delivery revenue in H1 FY23. MindGym's business model can flex between in-person and Digital delivery as needed

o  Digitally-enabled revenues represented 71% of total revenue (H1 FY22: 84%)

o  On demand digital product revenues grew 3% to £2.8m (H1 FY22: £2.7m), representing 11% of total revenue (H1 FY22:11%)

·      Repeat revenue³ remained strong at 87% of Group revenue

·      Gross margin increased by 1.6 percentage points from H1 FY22 to 87.5% due to the higher mix of Design and Advisory ('D&A') revenues where related costs are included within administrative expenses

·      Staff costs have increased by 6% to £17.2m, largely reflecting wage inflation

·      Profit before tax of £0.6m (H1 FY22: £17k) is in line with Board expectations. This includes an incremental £0.5m of amortisation related to Performa, which had not commenced in H1 FY22

·      Cash balance at 30 September 2022 of  £4.5m (31 March 2022: £10.0m). The movement includes:

o  £2.2m of capital investments

o  £1.6m decrease in trade and other payables, reflecting primarily the impact of bonus and commission timings

o  a £3.5m increase in trade and other receivables; we expect much of this receivables increase to unwind in H2 FY23, resulting in an improvement in cash conversion and cash position

·      The Group retains a £10m debt facility (£6m RCF, £4m accordion) which matures after three years, providing additional flexibility if required.  The facility remains undrawn as at 2 December 2022

·      The Board continues to prioritise investment for growth in digital over the coming years, and therefore no interim dividend will be paid for the period ended 30 September 2022. Once the Board has greater clarity on the performance of its digital investments, and of the broader economic outlook, we will revisit our dividend policy

Overview - operational summary H1 FY23

New client framework agreements⁴

o  Secured a number of significant framework agreements during H1 FY23, including our largest ever, with a global energy company, with revenues forecast to be in excess of £10m over the next 24 months

o  Other framework agreements, each between £1m-£3m, are also expected to drive revenues in H2 FY23 and FY24

Accelerated innovation

o  Continued strategy of investing in innovation to drive growth through market-leading research and products

o  The Leadership Point of View ('POV') was launched at the end of FY22, with the related whitepaper launched in H1 FY23.

o  Our new Wellbeing POV ('Wellworking') was launched during H1 FY23; the whitepaper will be published in Q4 FY23, when we also be launching five new Wellworking live and eWorkout products

o  The 'Precision Coaching' whitepaper (MindGym's proprietary coaching methodology), is being launched in January 2023, and will drive interest in Performa, MindGym's digital 1:1 coaching SAAS platform.

Digital development

o  Performa continues to receive positive early feedback

o  Continued enhancements to the Performa platform user experience and the portfolio of c.100 eWorkouts

o  Beta trials of the new Organisational Diagnostics solution start in H2 FY23 which covers culture, DEI, wellbeing and leadership

³Repeat revenue is defined as revenue from clients that have purchased products and services in one or more of the previous three years.

⁴ MindGym defines framework agreements as client projects, normally involving substantial levels of client investment over time. These often include separate, but related, stages of work. In most scenarios, the service provider will deliver all of the stages, but these are unlocked over the life of the framework.

Current Trading & Outlook

·      MindGym's outlook for the full year remains unchanged, despite the impact of economic headwinds, notably in the US

·      Second half growth includes the benefit of the large corporate frameworks

Octavius Black, Chief Executive Officer of Mind Gym, said:

We are encouraged by our first half performance and the significant momentum going into the second half, as a result of securing our largest ever framework agreement. In a volatile economic environment with a tight labour market, MindGym is increasingly well placed as the 'go to' partner to address the talent challenges that all organisations struggle to resolve.

Our investment in innovation and digital continues to deliver. New publications on leadership, coaching and wellbeing will set the agenda and equip our clients to invest in ways that transform their business in half the time and for a fraction of the cost.  Our development of the Performa platform will build momentum for our new 1:1 coaching service in FY24, and our new organisational diagnostics solution, currently in beta trials, which furthers our objective to be the primary strategic partner providing an end-to end service for our clients. 

Enquiries:

About Mind Gym

Mind Gym is a company that delivers business improvement solutions using scalable, proprietary products which are based on behavioural science. The Group operates in three global markets: business transformation, human capital management and learning & development.

Mind Gym is quoted on the London Stock Exchange Alternative Investment Market (ticker: MIND) and headquartered in London. The business has offices in London, New York and Singapore.

Further information is available at www.themindgym.com

Half Yearly report

Business overview

Revenues in H1 FY23 increased 11% on H1 FY22, reflecting underlying growth and the benefit of currency (FX) tailwinds. Whilst the US grew at 20% in the period, EMEA revenues have declined by 2% although this reflects some EMEA managed sales which were delivered, and therefore reported, in the US. MindGym works with 64% of the FTSE 100 and 57% of the S&P100.

Repeat revenue remained robust at 87%, in line with FY22 full year, slightly down on H1 FY22 (92%).

MindGym has won a number of significant framework agreements during H1 FY23, including its largest ever in respect of a global energy company, as well as a number of others each between £1m-£3m, which are expected to drive revenues in H2 FY23 and through FY24

Revenue from the Group's top 25 clients contributed 40% of revenue which is down from the 47% seen for the same period in FY22, reflecting a broadening of our client base.

Digitally-enabled revenue decreased 7% on prior year levels to £18.9m, (H1 FY22: £20.3m) to represent 71% of total revenue (H1 FY22: 84%), driven by the anticipated growth of in-person deliveries which grew from 4% in H1 FY22 to 15% of delivery revenue in H1 FY23. MindGym's business model can flex between in-person and Digital delivery as needed. Existing on demand digital product revenue grew by 3% to £2.8m (H1 FY22: £2.7m) to represent 11% of total revenue (H1 FY22: 11%).

We continue to invest for growth through accelerated innovation and digital development:

·      Our investment since FY20 has increased the pace of our innovation. The Leadership POV has been successfully launched, and Wellbeing ("Wellworking") was launched in H1 FY23, with significant interest from our clients. The related whitepaper on Wellbeing ("Wellworking") and five new live products and eWorkouts on this PoV will be launched in Q4 FY23   

·      The 'Precision Coaching' whitepaper (MindGym's proprietary coaching methodology), which will drive interest in Performa, MindGym's digital 1:1 coaching SAAS platform, is being launched in January 2023

·      Performa continues to receive positive early feedback and we anticipate momentum building over the next 12-24 months. We will also launch a new organisational diagnostics solution for culture, DEI, wellbeing and leadership, with Beta trials starting in H2 FY23; and enhancements to the eWorkouts solutions in the second half of this financial year

Financial Performance

Revenue in H1 FY23 increased 11% (2% on a constant currency basis) on H1 FY22 to £26.8m (H1 FY22: £24.1m):

·      In EMEA, revenue decreased by 2% to £10.1m (H1 FY22: £10.3m), representing 38% of total revenue. EMEA revenues have been reduced by EMEA managed sales which were delivered, and therefore reported, in the US. Revenue from the top 25 clients decreased to 59% of regional revenue (H1 FY22: 66%), reflecting the broadening of the client base

·      In the US, revenue increased by 20% (4% on a constant currency basis) to £16.7m (H1 FY22: £13.9m), representing 62% of total revenue. Revenue from the top 25 clients was broadly flat at 54% of regional revenue (H1 FY22: 55%)

Revenue from digital products in H1 FY23 was £2.8m (H1 FY22: £2.7m), representing 11% of total revenue (H1 FY22: 11%). Digitally-enabled revenue (including workouts delivered virtually) decreased by 7% to £18.9m (H1 FY22: £20.3m), representing 71% of total revenue (H1 FY22: 84%), due to some switch back to in-person deliveries after COVID.

Gross profits margins at 87.5% are up 1.6 percentage points up on prior year. This largely reflects the growth of D&A work in the period, in part supporting the significant framework agreements that are being won; this will result in significant revenues over H2 FY23 and FY24. Whilst we have seen cost of sales increases driven by the increased share of in-person delivery, these are more than offset (in absolute terms) by the higher prices of in-person delivery.

Overheads of £22.7m in the period increased by 10% (H1 FY22: £20.6m), reflecting wage inflation and the carryover of headcount increases in FY22 with salary costs increasing 6% and average headcount increasing 2% to 324 (H1 FY22: 319). The price increases implemented in the year, coupled with operational efficiencies, have more than offset the wage inflation we have seen. Share based payments were £28k in the period (H1 FY22: £0.3m), impacted by the reversal of historic charges due to attrition. Awards to management, including relevant performance conditions, were granted in July 2022.

Profit before tax in the period was £0.6m (H1 FY22: £17k); this includes an incremental £0.5m of amortisation related to Performa, which had not commenced in H1 FY22.

Basic earnings per share in the period were 0.85 pence (H1 FY22: loss of -0.01 pence). Diluted earnings per share were 0.84 pence (H1 FY22: -0.01 pence).

The Group continued to invest in its new digital products with £2.1m (H1 FY22: £2.4m) capitalised during the period, which meets the definition of development costs under IAS 38, "Intangible assets". Total intangible assets were valued at £9.8m at 31 September 2022. A further £0.1m was capitalised in tangible assets in the period relating to IT equipment and office fixtures and fittings.

The balance sheet remains secure with no bank debt; cash at bank at 30 September was £4.5m, a reduction of £5.5m from the year-end balance at 31 March 2022 of £10.0m. This was due predominantly to £2.2m capital expenditure, a £1.6m decrease in trade and other payables related to the impact of bonus/commission timings, and a £3.5m increase in trade and other receivables; we expect much of this receivables increase to unwind in H2 FY23, resulting in an improvement in cash conversion and cash position. Overdue debt has reduced to 9% of trade debtors from 10% in H1 FY22.

The Group retains a £10m debt facility (£6m RCF, £4m accordion) which matures after three years, providing additional flexibility if required.  The facility remains undrawn as at 2 December 2022.

Overall net assets increased by £1.7m to £21.3m in the six months to 30 September 2022.

Dividend

The Board continues to prioritise investment for growth over the coming years, and therefore no interim dividend will be paid for the period ended 30 September 2022. The dividend policy is reviewed annually.

Outlook 

MindGym's outlook for the full year remains unchanged, despite the impact of economic headwinds, notably in the US.

Second half growth includes the benefit of large corporate frameworks.

Octavius Black

Chief Executive Officer

Dominic Neary

Chief Financial Officer

MIND GYM PLC    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

MIND GYM PLC    CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The Board of Directors approved these condensed interim financial statements on 1 December 2022.

MIND GYM PLC    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

MIND GYM PLC    CONSOLIDATED STATEMENT OF CASH FLOWS

MIND GYM PLC    NOTES TO THE GROUP FINANCIAL STATEMENTS

1.   General information

Mind Gym plc ("the Company") is a public limited company incorporated in England & Wales and its ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange ("AIM"). The address of the registered office is 160 Kensington High Street, London W8 7RG. The group consists of Mind Gym plc and its subsidiaries, Mind Gym (USA) Inc., Mind Gym Performance (Asia) Pte. Ltd and Mind Gym (Canada) Inc. (together "the Group").

The principal activity of the Group is to apply behavioural science to transform the performance of companies and the lives of the people who work in them. The Group does this primarily through research, strategic advice, management and employee development, employee communication, and related services.

2.   Basis of preparation

The condensed interim financial statements have been prepared in accordance with the requirements of the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2022, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, including interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"), and with the Companies Act 2006 applicable to companies reporting under IFRS. The unaudited interim financial information does not constitute statutory accounts within the meaning of the Companies Act 2006. This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 1 December 2022.

Statutory accounts for the year ended 31 March 2022 were approved by the Board of Directors on 9 June 2022 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The interim financial statements have been prepared on a going concern basis under the historical cost convention.

The interim financial statements are presented in pounds sterling. All values are rounded to £1,000 except where otherwise indicated.

The accounting policies used in preparing the interim results are the same as those applied to the latest audited annual financial statements.

3.   Segmental analysis

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who is responsible for allocating resources and assessing performance of the business. The chief operating decision maker has been identified as the Board. The Group has two operating segments: EMEA (comprising the United Kingdom and Singapore) and America (comprising the United States and Canada).

Both segments derive their revenue from a single business activity, the provision of human capital and business improvement solutions.

The Group's business is not highly seasonal and the Group's customer base is diversified with no individually significant customer.

Segment results for the 6 months ended 30 September 2022 (Unaudited)

Segment result

The mix of revenue for the six months ended 30 September 2022 is set out below.

Segment results for the 6 months ended 30 September 2021 (Unaudited)

Segment result

The mix of revenue for the six months ended 30 September 2021 is set out below.

Segment results for the year ended 31 March 2022 (Audited)

Segment result

The mix of revenue for the year ended 31 March 2022 is set out below.

4.   Employees

Staff costs were as follows:

The average number of Group's employees by function was:

The period end number of Group's employees by function was:

5.   Net finance costs

6.   Tax

The statutory tax credit of £207,000 (six months ended 30 September 2021: charge of £30,000; year ended 31 March 2022: credit of £2,084,000) represents an effective tax rate on profit before tax of -32% (six months ended 30 September 2021: 176.5%; year ended 31 March 2022: 432.4%).

7.   Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the year. The Company has potentially dilutive shares in respect of the share-based payment plans (see Note 14).

*For 30 September 2021 dilutive potential ordinary shares have no effect on the calculation of diluted EPS as their conversion into ordinary shares cannot increase the loss per share. 

8.   Dividends

The Board did not propose a final dividend for the year ended 31 March 2022. No interim dividend is proposed for the period to 30 September 2022.

9.   Intangible assets

Development cost additions in the six months ended 30 September 2022 includes software development costs directly incurred in the creation of new digital assets.

10.  Trade and other receivables

Non-current assets includes £257,000 (30 September 2021: £212,000; 31 March 2022: £217,000) of prepayments in respect of property deposits. 

Trade receivables have been aged with respect to the payment terms as follows:

11.  Trade and other payables

12.  Borrowings

The Group entered into a £10 million debt facility (£6m RCF, £4m accordion) on 30 September 2021 which matures after 3 years.  The facility remains undrawn as at 2 December 2022. 

13.  Share capital

14.  Share based payments

The Group awards options to selected employees under a Long-Term Incentive Share Option Plan ("LTIP"). The options granted to date vest subject only to remaining employed up to the vesting date. Unexercised options do not entitle the holder to dividends or to voting rights.  The awards granted during the six months to 30 September 2021 are subject to performance conditions based on revenue, adjusted earnings per share and total shareholder return.

The awards granted in the six months to 30 September 2022 are subject to performance conditions based on revenues and EBITDA. Some awards granted during this time period are time bound only.

On the 30^th September 2019 the Group launched an annual Save As You Earn Scheme and an Employee Share Purchase Plan for all eligible employees in the UK and USA respectively.

The total share-based payments expense was: