This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.

 

26 April 2023

 

1Spatial plc

 

("1Spatial", the "Group" or the "Company")

 

Final results for the year ended 31 January 2023

 

1Spatial, (AIM: SPA), a global leader in Location Master Data Management ('LMDM') software and solutions, is pleased to announce audited final results for the year ended 31 January 2023.

 

·      Significant high-value contracts signed in FY 2023 combined with a strong pipeline of prospects.

·      Organic revenue growth achieved from new customer wins and expansion contracts in all regions.

·      A significant increase in Group profit before tax compared to FY 2022.

 

 

Financial highlights

	31 January  2023 £m	31 January  2022 £m	Change   %
Group revenue	30.0	27.0	+11
Recurring revenue	14.8	12.2	+21
Term licences revenue	5.2	2.9	+79
Group total ARR*	15.8	13.4	+18
Term licences ARR*	5.6	4.1	+37
Group gross profit	15.5	13.9	+12
Adjusted EBITDA**	5.0	4.2	+19
Adjusted EBITDA** margin (%)	16.7	15.5	+1.2pp
Operating profit	1.3	0.4	+225
Profit before tax	1.0	0.2	+400
Earnings per share - basic (p)	1.0	0.3	+233
Earnings per share - diluted (p)	0.9	0.3	+200
Net cash***	3.1	3.2	(3)

 

* Annualised recurring revenue ("ARR") - Annualised Recurring Revenue ("ARR") is the annualised value at the year-end of committed recurring contracts for term licences and support & maintenance.

** Adjusted EBITDA - Adjusted EBITDA is a company-specific measure which is calculated as operating profit/(loss) before depreciation (including right of use asset depreciation), amortisation and impairment of intangible assets, share-based payment charge and strategic, integration, and other non-recurring items.

*** Net cash - Net cash is gross cash less bank borrowings.

 

Operational highlights

·      Approximately 50% of revenue represented by recurring revenue with year-on-year term licence revenue growth of 79%.

·      Continued R&D investment in innovative solutions creating market-leading Location Master Data Management ('LMDM') platform.

·      Inflationary cost pressures across the business being well managed, with the increasing strength of the balance sheet providing the confidence to continue investment into people and offering.

·      Named among the top 100 organisations featured in the 2023 UK's Most Loved Workplace® list, backed by Best Practice Institute ('BPI') research and analysis.

 

Outlook

 

·      Trading in the current financial year has started positively with a significantly growing sales pipeline.

·      Two new SaaS offerings in trials with customers, representing an additional avenue for growth.

·      Increased investment to accelerate scale up of the sales team to capture the substantial opportunity presented.

·      Continuing growth of ARR and revenue backlog provides comfort during challenging macro environment.

·      While cognisant of inflationary cost pressures, the Board remains confident in delivering further progress in FY 2024.

 

Commenting on the update, 1Spatial CEO, Claire Milverton, said:

 

"This year confirmed that 1Spatial sits right at the heart of numerous changes across multiple sectors. We secured a number of high-profile wins, invested in our technology and sales team, and expanded our customer and partner networks to position the business to serve a range of customers globally.

 

"Looking ahead, we continue to see multiple areas of significant opportunity, particularly in the US and for our new SaaS offerings. Through the launch of our cloud platform we are adding a new layer of potential growth, targeting niche areas of the location market where we have identified significant demand and low levels of competition. We believe these offerings have the potential to be transformational for 1Spatial.

 

"Trading in the new financial year has begun positively. Our growing sales pipeline and increased levels of recurring revenue provide the Board with confidence in the Group's prospects. We will continue to invest in our sales team and offering in order to capture what we believe to be a considerable long-term growth opportunity."

 

 

For further information, please contact:

 

1Spatial plc	01223 420 414
Claire Milverton / Stuart Ritchie
Liberum (Nomad and Broker)	020 3100 2000
Max Jones / Edward Mansfield / Miquela Bezuidenhoudt
Alma PR	020 3405 0205
Caroline Forde / Hannah Campbell	1spatial@almapr.co.uk

 

1Spatial plc's LEI Number is: 213800VG7OZYQES6PN67

 

About 1Spatial plc

1Spatial plc is a global leader in providing Location Master Data Management ('LMDM') software and solutions, primarily to the Government, Utilities and Transport sectors. Our global clients include national mapping and land management agencies, utility companies, transportation organisations, government and defence departments.

 

Today - as location data from smartphones, the Internet of Things and great lakes of commercial Big Data increasingly drive commercial decision-making - our technology drives efficiency and provides organisations with confidence in the data they use.

 

We unlock the value of location data by bringing together our people, innovative solutions, industry knowledge and our extensive customer base.  We are striving to make the world more sustainable, safer and smarter for the future. We believe the answers to achieving these goals are held in data. Our 1Spatial Location Master Data Management (LMDM) platform incorporating our 1Integrate rules engine delivers powerful data solutions and focused business applications on-premise, on-mobile and in the cloud. This ensures data is current, complete, and consistent through the use of automated processes and always based on the highest quality information available.

 

1Spatial plc is AIM-listed, headquartered in Cambridge, UK, with operations in the UK, Ireland, USA, France, Belgium, Tunisia and Australia.

 

For more information visit www.1spatial.com

 

 

 

 

Chairman's Report

1Spatial has delivered another year of solid growth, securing landmark new customers across our key geographies, many of which have the potential for further expansion. We have increased investment in the business, adding to our team and product and thereby enhancing the ability of the business to scale through the sale of repeatable business applications and software solutions.

 

Despite the current macro environment, digital transformation and government investment initiatives continue at pace and are driving a substantial need for data management tools, particularly those capable of managing complex location data. 1Spatial is increasingly being chosen as the provider for these projects sitting at the heart of this rapidly increasing demand.

 

Our key financial objectives for the year were to grow recurring revenues, while generating funds to be reinvested into the business. We are making meaningful progress against our strategic priorities and I am delighted to report that we achieved double-digit revenue and profit growth this year. Our focus on growing recurring revenue can be seen in the increasing proportion of recurring revenues we are now generating, which now account for approximately 50% of total revenue. The Group has successfully managed inflationary pressures, achieving adjusted EBITDA growth, resulting in our second year of operating profit and profit before tax.

 

Operational successes

We have won several new landmark customers across all regions, with particular success in the UK and the US, some of which provide us with secure long-term levels of annual recurring revenue ('ARR') and excellent references and opportunities to increase revenues within these accounts.

 

People

During FY 2023, we invested in the expansion of our senior leadership team to ensure we have the depth of management to deliver our growth strategy and have been encouraged by the immediate positive impacts the new team members have made. We were delighted to welcome Stuart Ritchie to the Board as CFO in December 2022; he will provide great financial leadership to the business alongside Claire and the team, as we seek to capture the considerable opportunity ahead of us. On behalf of the Board, I would like to thank Andrew Fabian for the role he has played as CFO in seeing 1Spatial safely into its next stage of growth, providing the business with a solid financial platform to support its evolving SaaS business model.

 

Environmental, Social and Governance ('ESG')

Like many businesses, ESG is very important to 1Spatial as we strive to make the world safer, smarter and more sustainable for the future. This year, we launched our ESG strategy and established an ESG steering committee. During the coming year, we also plan to undertake a detailed carbon assessment, starting with our UK operations, further details of which are set out in the Annual Report. 

    

Summary and outlook

This year 1Spatial has become a more robust business with an increasing ability to capture the increasing demand for accurate and usable location data. We are successfully delivering against our three-year growth plan, improving profits and cash generation, whilst continuing to invest in our platform which will act as a catalyst for future expansion.

 

Looking ahead, we continue to see significant opportunities from the US, from our expanding partner network and from our investment in our market-leading cloud platform. Through the launch of our cloud platform, we are adding a new layer of potential growth, targeting niche areas of the location market where we have identified significant demand and low levels of competition, for example our automated solution for the creation of traffic management plans ('TMPA').

 

We enter the new financial year in a strong position and we believe the investments made over the past year in our people and technology position us well to take advantage of the huge opportunity that is ahead.  With a strong sales backlog and increased levels of recurring revenue, I am confident the Group's success over the past 12 months is set to continue.

 

Andy Roberts

Non-Executive Chairman

 

 

 

 

CEO Review

This has been another year of progress for 1Spatial achieving growth despite a difficult economic backdrop, delivering across our strategic growth pillars of Innovation, Customer Relationships and Smart Partnerships.

Resilient financial performance

The Group achieved double-digit revenue growth in the year, with an increasing proportion of recurring revenues, which now account for approximately 50% of total revenue. Within that, high margin software term licence revenue increased by 79% to over £5 million.

Our rules engine, 1Integrate, and cloud portal, 1Data Gateway, are recognised both by our customers and a growing number of influential partners, as powerful tools to ensure good quality data and trust when sharing data. Through our offering, we help over 1,000 customers, spanning key sectors such as government, utilities and transportation, make better business decisions and move towards a smarter world, through improved accuracy and sharing of location data.

We are global leaders in providing Location Master Data Management and this proposition is at the intersection of two global growing markets. Firstly, the global geographic information system ('GIS') market size reached US$ 10.1 billion in 2021. Looking forward, the IMARC Group expects the market to reach US$ 21.1 billion by 2027, a CAGR of 13.1% during 2022-2027. Similarly, the global master data management market was valued at US$16.68 billion in 2022 and is expected to grow to US$ 54 billion by 2030 at a CAGR of 15.8% during the forecast period according to Polaris Market Research.

US delivering strong growth

The US has been key to the Group's expansion, being the most significant contributor of recurring revenue with growth of 45% in annualised recurring revenue at constant currency. During the year, we successfully sold and implemented 1Integrate and 1Data Gateway in several clients, both new and expanding on existing contracts, building our annual recurring revenue from our repeatable solutions such as Next Generation 9-1-1.

US legislation requires all states to upgrade their emergency services and public safety systems. Building digital platforms and incorporating the use of location data to support Next Generation ('NG') 9-1-1 services and ensure a modern and safe emergency response system. Our NG-9-1-1 solution, now being implemented in eight US states, ensures that emergency services are using validated, integrated and up-to-date data and ultimately that the teams on the ground can respond to incidents more quickly.

The launch of our cloud platform in January 2023 also means we now offer a "light version" NG9-1-1 SaaS solution aimed at the counties and cities within each state, significantly increasing our addressable opportunity. We continue to invest in this solution and the trials are progressing as planned.

There is also sizeable opportunity for growth within each state by launching additional solutions, including  Highway Performance Monitoring Systems ('HPMS') and Conflation. HPMS offers US highway agencies the ability to fully comply with reporting requirements on the use of the routes within their jurisdiction. The Conflation solution enables the aggregation of large quantities of data, the automatic selection of the best quality data points and the generation of an accurate, reliable whole data set.  We have already seen success in California where we have doubled the initial annual term licence revenue through the upsell of additional solutions.

This all contributes to a high-margin medium-term opportunity, based around our own IP and channels to market that can transform the economics of our US operation. Further out we have the opportunity for expansion into Canada and Latin America.

Europe

In FY 2022, Europe was the most significant geographical component at a revenue level. However, year- on-year growth of 1% in FY 2023 led to this segment dropping behind the UK in FY 2023. Europe experienced some delays in FY 2023 transitioning its large customer base away from perpetual licences, but we are encouraged by the year-on-year increase of 15% in Europe's Annual Recurring Revenue ('ARR') as well as a significant increase in term licence revenue compared to last year. On 1 February 2023, we appointed a highly experienced European Sales Director to lead this transition and to focus our teams on sales of proprietary product.

UK

In the UK, we have delivered top and bottom-line growth through new multi-year contracts across different sectors. We signed our first contract with HS2, to build a data validation gateway, which has significant potential for further expansion. The gateway solution will enable HS2 to validate the quality, conformance and design of construction-related data submitted by their supply chain, which in turn will contribute to the efficiency and effective information delivery on Europe's largest infrastructure project.

We are pleased that the first phase of the NUAR Project ('National Underground Asset Register') (also known as the MVP stage), has now been completed and launched by government on 5 April 2023. This first phase of NUAR contains data from public and private sector organisations which own pipes and cables in North East England, Wales and London including all of the major energy and water providers.

Successes such as these in the UK, and the considerable size of our sales pipeline, give us the confidence to continue to invest in the business.  We have the right structure to deliver on the growing opportunity as we move into the final year of our three-year growth plan.

Strategic review

We are building our highly scalable business on three pillars: Innovation, Customer Relationships and Smart Partnerships and I am proud to report considerable progress against all three throughout the year.

Innovation

Innovation lies at the heart of 1Spatial and during the year we invested in our market-leading platform to ensure our patented software remains at the forefront of the expanding industry. Our software can handle huge volumes of complex data allowing our customers not only to ensure accuracy and security but also save significant amounts of time and money, giving them the ability to solve complex challenges in the management of their spatial and non-spatial data.  

The 1Spatial Platform for Location Master Data Management can be split into two key areas, one of which is Data Management Solutions (managing data to ensure it is correct, consistent and compliant) which we continued to invest in throughout the year, including in our patented 1Integrate rules engine and our cloud-enabled portal 1Data Gateway, to improve the user experience. This innovation in both 1Integrate and 1Data Gateway facilitated further growth and accessibility of our solutions and the development team continue to assess the products against both customer and market needs. 

The second key area is Business Applications where we have expanded our addressable market opportunity through the launch of new offerings and cloud-based versions of some core solutions, making our technology available to mid-tier organisations.

We provide two types of business applications to meet our customers' needs. Applications can either plug directly into the 1Spatial Platform or alternatively can plug into the 1Spatial Platform whilst also utilising the benefits of the Esri technology.

Applications plugged directly into the 1Spatial Platform

·      Specific Business Applications - term licences (cloud enabled)

We have targeted applications such as those for NG9-1-1 which are cloud enabled and can reside within a customer's own infrastructure, within their own private cloud or 1Spatial can offer a hosted solution.

 

·      Specific Business Applications - SaaS applications

This year, we continued the development of our Traffic Management Plan Automation ('TMPA') solution for production of traffic management within minutes. This is a UK application and is currently undergoing trials by selected customers.

·      Validation Applications (Validation as a Service - VaaS)

These applications validate data to a pre-defined set of rules and return a report and visual map-based representation of the errors. The first of these applications is NG9-1-1 which we have now launched and is undergoing trials. We have also identified a number of other VaaS solutions across our territories which we will be looking to trial during H2 of FY24. 

Both the Specific Business Applications and Validation Applications provide the Group with potential exciting new "go to" market models, lowering the price point for new customers onto the platform, making our technology available to mid-tier organisations.

·      Launch of 1Spatial cloud platform

During the year, we finalised the majority of the development on the 1Spatial cloud platform which will allow us to sell the cloud solutions noted above. The multi-tenancy SaaS platform will be more cost effective for 1Spatial as we will be managing fewer deployments and the elastic nature of the platform architecture is more cost efficient.

Applications using the benefits of Esri technology

To meet our customers' needs we also invested in our Esri based business applications, such as 1Water and 1Telecomms which manage water and telecom networks respectively. Whilst these applications are being sold to new customers they are also necessary to facilitate the migration from the Group's legacy Elyx platform to Esri-supported solutions.

Customer relationships

We continued to strengthen our relationships with existing customers throughout the year and secured landmark new customer wins across all territories, with particular growth in the UK and US, including high-profile national-level digital transformation initiatives. This has demonstrated 1Spatial's increasing ability to secure larger contracts across key geographies and to design, deliver and implement large-scale critical systems. We typically expand our customer relationships over time, as we identify additional areas in which our software and expertise can support our customers.

This year we undertook a customer satisfaction survey with our global key accounts and, although we recognise there are areas to address, compared to the 40+ industry average of B2B software and SaaS organisations, we are satisfied with the results of an overall 8.1 Net Promoter Score.  (Source: Retently B2B sample of 10,000 B2B organisations)

The success of our customer focus, combined with ongoing transition to term licencing, can be seen in the 26% growth in Annualised Recurring Revenue driven both by new customer wins and expansion of existing customer accounts.

Land and expand

Key new customer wins include:

·      High Speed Two (HS2) - supporting the UK's new high speed rail network to build a data validation gateway (£0.9m over two years with the potential for expansion for a further two years).

 

·      Major multi-year contract with a leading European aerospace agency - for software licenses, including 1Telecomms and 1Integrate, for the implementation and subsequent annual recurring software and managed services. The total value of the contract over five years is approximately €3 million.

 

·      Five year contract with University of Maryland CATT Labs - with an initial value of around US$0.6 million, which will be recognised over the five-year period, adding to the Group's annual recurring revenue.

 

·      Contract with the state of New York - for various proof-of-concept projects using 1Integrate and 1Data Gateway.

 

·      Seven year contract with the state of Arkansas - for NG9-1-1, for US$1.2 million over the period and now the eighth US state to select the solution.

 

·      Contract with the Eastern Transportation Coalition, a partnership of 18 US east coast states and Washington DC, which has secured its first contract through the marketplace, for US$400k with Massachusetts Department of Transportation.

·      Contract with the state of Indiana - for various proof-of-concept projects using 1Integrate and 1Data Gateway.

 

·      Contract with Highlander Tek in the USA for licence fees for 1Integrate and 1Data Gateway, for US$90k, a geospatial platform that provides delivery-specific location information to streamline the shipping process from quote to delivery to payment.

 

These new clients provide secure long-term levels of ARR and excellent references and opportunities to increase revenues within these accounts.

Customer expansion contracts in the period, included:

·      Department of Environment, Food and Rural Affairs ('Defra') to support the Land Management System, operated by Defra's Rural Payments Agency ('RPA'), in partnership with Version 1 - £1.2 million over five years.

 

·      Another contract win with Defra and RPA to support its field collection system - £0.5 million (£0.4 million licence over two years).

 

·      Multi-year framework agreement with Land and Property Services in Northern Ireland in partnership with Version 1, to support the Department of Finance's ongoing programme of Digital Transformation.

 

·      Managed service for a major utility organisation in France in support of the deployment of 1Water - €0.3 million.

 

·      US$1.4 million expansion contract with the state of California over four years - secured in partnership with Rizing (now Wipro), a global SAP partner. The state of California is an existing client of 1Spatial, having already selected 1Spatial's Next Generation 9-1-1 solution.

 

·      Additional services and licences for Google Real Estate and Workplace Services - US$0.9 million (US$0.3 million licence).

 

·      In France, 32 existing customers have completed or commenced migration from the Group's legacy Elyx platform to Esri-supported solutions, including 1Water.

 

Smart partnerships

Partnerships have played a critical role in enabling us to secure new customers in the year, demonstrating the credibility of these businesses.

Key focus areas have been to identify and extend our relationships with large global corporates, where location data management forms part of a larger customer bid, and to extend our technology partnerships with Esri and other geospatial vendors such as Hexagon Geospatial.

Key partnership highlights include the signing of a teaming agreement (delivery partnership) with CGI Inc., one of the world's largest independent IT and business consulting services firms, to be a strategic delivery partner on a five-year contract with the Home Office. We also started working in partnership with ATOS, a global leader in digital transformation and Rizing (now part of Wipro), a global SAP partner. We secured a four-year contract with the California Department of Transportation ('Caltrans') which was won in conjunction with Rizing and is an indication that our strategic growth plan in the US continues to bear fruit.

Large global corporates

We are increasingly being selected as the data integrity provider within a consortium, cleansing the data before passing it back through wider systems. The depth of our data domain expertise and the enterprise grade of our software means we are one of the few technology partners able to work on the scale that our partners need.

New partners we have commenced work with this year include Atkins, Qinetiq and Landmark. We also strengthened our longstanding partnership with both Version1 and Ordnance Survey. 

Technology partnership - Esri

Our long-term partnership with Esri is a key differentiator for us in many markets and provides a major opportunity as we build our own IP solutions. Esri is the global market leader in GIS with a network of over 2,700 partners around the world. We are engaging with our European contacts to showcase our Utility Network Migration Capabilities to different geographies across Europe.

Corporate activity

We will continue to identify potential strategic and bolt-on acquisitions to complement our organic growth.

People

The success of our business is a tribute to our employees' commitment and knowledge. We continue to invest in our people, providing them with the tools and training to support and allow them to realise their potential. The success of this is evidenced through our selection as one of the top 100 organisations featured on the 2023 UK's Most Loved Workplace® list backed by Best Practice Institute ('BPI') research and analysis. This was based on our scores on their Love of Workplace Index™, which surveys employees on employee satisfaction and sentiment, including the level of respect, collaboration, support, and sense of belonging they feel inside the Company.

We continue to roll out mental health awareness training, internal events and initiatives to encourage staff to take time out from their working day and have appointed mental health first aiders. We kicked off our annual wellbeing month in September 2022 and held a range of activities including an employee volunteering community clean-up day in the UK.

We are always looking at ways to ensure equality and diversity across our Company and an inclusive, welcoming working environment for everyone. Over the past year, we have created global initiatives to celebrate: International Women's Day, Thanksgiving, Mental Health Awareness Week, Earth Day and Health and Happiness Month.

We continuously monitor the skills and expertise of the senior leadership teams across all of our regions. During the latter stages of FY23 and early part of FY24, we brought a highly experienced Sales Director into each of our European and US businesses. These individuals will enable us to deliver on the growing opportunities ahead of us and to ensure we have the ability to grow our sales pipeline across our key geographies.

During the year we carried out an employment engagement survey to determine employee satisfaction. We were delighted with the overall results and feel that we have developed a great team spirit as an organisation. The survey showed that over 80% of our people are happy with their line manager relationship and feel respected and trusted by their line manager and peers and 70% of colleagues felt that they were regularly informed with relevant 1Spatial news. We will continue to survey the team and strive to improve our scores each year.

The teams continue to show ingenuity and commitment day-to-day, and live our values as revised in 2021: We Respect, We Innovate, We Collaborate, We Trust and We Care. As a Board, we thank them wholeheartedly; their ability to innovate continually whilst delivering the highest levels of customer satisfaction means that our growth pillars are built on very secure foundations.

Strategic priorities for the year ahead

As we move into our final year of our three-year growth plan, we will continue to invest in the business to take advantage of the huge opportunity ahead. Through the launch of our cloud platform in January 2023, we have added a new layer of potential growth, targeting niche areas of the location market where we have identified significant demand and low levels of competition.

 

We will continue to grow our pipeline and invest in the business and our people to support our expanded customer base. The Group remains focused on increased revenue growth, underpinned by growing annual recurring revenue, increased profitability at adjusted EBITDA level and higher cash generation over the long-term.

 

Current trading and outlook

This year confirmed that 1Spatial sits right at the heart of numerous changes across multiple sectors. We secured a number of high-profile wins, invested in our technology and sales team, and expanded our customer and partner networks to position the business to serve a range of customers globally.

 

Looking ahead, we see multiple areas of significant opportunity, particularly in the US and for our new SaaS offerings. Through the launch of our cloud platform we are adding a new layer of potential growth, targeting niche areas of the location market where we have identified significant demand and low levels of competition. We believe these offerings have the potential to be transformational for 1Spatial.

 

Trading in the new financial year has begun positively. Our growing sales pipeline and increased levels of recurring revenue provide the Board with confidence in the Group's prospects, and we will continue to invest in our sales team and offering to capture what we believe to be a considerable long-term growth opportunity.

 

Claire Milverton
Chief Executive Officer

 

 

 

 

CFO review

In FY 2023 the Group continued to build on foundations set in the previous year by delivering double-digit growth in annual revenues, future recurring revenues and adjusted EBITDA. The improvement in the financial performance, notably in operating profit and profit before tax, has resulted in an increase of 112% in cash generated from operations to £5.4 million (FY 2022: £2.5 million). Increases in these key financial metrics have allowed the Group to continue significant investment into development of its proprietary technology. 

Revenue

Group revenue increased by 11% (9% at constant currency) to £30.0 million from £27.0 million in FY 2022.

Recurring revenue

The business strategy is to grow revenue from repeatable business solutions on long-term contracts by increasing sales of term licences (rather than one-off perpetual licences) and increasing the proportion of recurring revenue compared to services. As a result, excluding the impact of the reduction in perpetual licence revenue, the business achieved a year-on-year growth in total revenue of 15%. Recurring revenue, as a percentage of total revenue, increased to almost 50% (FY 2022: 45%).

Revenue by type is shown below:

Revenue by type
	FY 2023 £m	FY 2022 £m	% change
Recurring revenue	14.76	12.18	21%
Services	13.52	12.36	9%
Revenue (excluding perpetual licences)	28.28	24.54	15%
Perpetual licences	1.72	2.49	(31%)
Total revenue	30.00	27.03	11%
Percentage of recurring revenue	49%	45%

 

Annualised Recurring Revenue

The Annualised Recurring Revenue ('ARR') increased by 17% from £13.4 million to £15.8 million as at 31 January 2023 with ARR attributable to term licences growing by £1.1 million. The growth rate varied by region with the US region growing at 59%, boosted by the several multi-year term licence sales. The overall renewal rate improved to 94% (FY 2022: 93%) providing a strong platform for the current year.

ARR by region
	FY 2023 £m	FY 2022 £m	% growth
UK/Ireland	6.51	5.93	10%
Europe	5.49	4.79	15%
US	2.22	1.40	59%
Australia	1.56	1.32	18%
Total ARR	15.78	13.44	17%

 

Committed revenue

The level of committed services revenue, which has reduced since the start of the year as services revenue on the major projects we won last year is recognised, nevertheless remains high at approximately £10 million and provides strong revenue visibility, underpinning the Group's strong financial footing.

The combination of growing ARR, committed services revenue backlog and a strong pipeline of prospects means that the business is on track to make further progress on its revenue growth plan. With the business focus on developing and selling repeatable software solutions, there is an increased level of revenue visibility, which allows the Board to continue to invest with confidence.

Regional revenue

Regional revenue
	FY 2023 £m	FY 2022 £m	% change	% change (constant fx)
UK/Ireland	11.92	9.93	20%	20%
Europe	11.01	10.88	1%	1%
US	4.30	3.72	16%	3%
Australia	2.77	2.50	11%	6%
Total revenue	30.00	27.03	11%	9%

 

Revenue (at constant currency) grew organically in all regions, with overall revenue growth of 11%. The UK/Ireland region had a further year of double-digit growth, with a revenue increase of 20%. In Europe, revenue was impacted by the timing of closing contracts during the year and a slower transition to a recurring term licence model than anticipated. This resulted in modest growth of 1% at constant currency. The US had a strong year with a large increase in sales of term licences, increasing total ARR by 59%. Combined with a lower level of services, the revenue growth in the year in the US was more modest than in previous years at 16%. In Australia, where revenue is primarily derived from third-party software deals, we experienced more competitive pricing pressure, combined with the transition from perpetual to term licences, which resulted in only 6% growth in revenue at constant currency. Going forward, all regions will continue to focus on increasing sales of higher margin owned technology sold as term licences.

Gross profit margin

The gross margin grew by 11% but gross margin % was the same as the prior year at 52%. The Board approved expenditure increases in sales and delivery capacity in order to secure higher value contracts; and increased spending on R&D, which is included within the cost of sales, is expected to yield higher gross margins in future years. Going forward, the management team are also focused on driving improvements to gross margin through revenue growth of higher margin term licences and SaaS solutions.

Adjusted EBITDA

The adjusted EBITDA increased by 19% to £5.0 million from £4.2 million in the prior year resulting in a higher adjusted EBITDA margin of 16.7% (FY 2022: 15.5%). Cost management remains an important focus and expenses are constantly reviewed to ensure the level is appropriate for the structure of the business during this growth phase.

Strategic, integration and other non-recurring items

Included within strategic, integration and other non-recurring items are costs amounting to £0.2 million relating to the change of Chief Financial Officer ('CFO') in December 2022. Costs include all payments due to the outgoing CFO on exit together with professional services fees incurred in onboarding his replacement, drafting of contracts, share options and tax advice.

 

Operating profit and profit before tax

The Group achieved an operating profit of £1.3 million (FY 2022: £0.4 million) and profit before tax of £1.0 million (FY 2022: £0.2 million), representing a further year of significantly improved profitability for the Group compared to the prior year.

Taxation

The net tax credit for the period was £14k (FY 2022: £0.2 million). The 2022 tax credit is as restated following a prior year adjustment leading to the recognition of a deferred tax asset.

Balance sheet

The Group's net assets increased to £17.4 million at 31 January 2023 (2022: £15.5 million), mainly due to the overall profit after tax adjusted for currency differences in reserves.

Trade and other receivables increased in the year to £14.2 million (FY 2022: £12.3 million), mainly due to increased accrued income at year-end and timing of invoicing and payment receipts attributable to the increased level of revenue. Trade and other payables increased in the year to £15.8 million (2022: £13.3 million) due to timing of payments around year end and increases in the levels of recurring cost around the Group.

Cash flow

Operating cash inflow (before strategic, integration and other non-recurring items) increased significantly to £5.4 million (2022: £2.8 million) due to continued focus on improving working capital on larger projects, resulting in a significant improvement in free cash flow in the year. As part of the three-year growth plan, the Group has been investing in expanding the sales and delivery team and investment in product development and this impacted the operating cash flow and free cash flow as shown below.

Operating cash flow		FY 2023	FY 2022
		£'000	£'000
Cash generated from operations		5,352	2,497
Add back: Cash flow on strategic, integration and other non-recurring items		48	294
Cash generated from operations before strategic, integration and other non-recurring items		5,400	2,791

 

Free cash flow		FY 2023	FY 2022
		£'000	£'000
Cash generated from operations before strategic, integration and other non-recurring items		5,400	2,791
Net interest paid		(210)	(134)
Net tax received		179	176
Expenditure on product development and intellectual property capitalised		(3,854)	(2,449)
Purchase of property, plant and equipment		(163)	(164)
Lease payments		(1,099)	(1,088)
Free cash flow before strategic, integration and other non-recurring items		253	(868)
Cash flow on strategic, integration and other non-recurring items		(48)	(294)
Free cash flow		205	(1,162)

 

Investment in R&D

Development costs capitalised in the year increased to £3.9 million (FY 2022 £2.4 million) as the business has increased its investment in its technology and business solutions.  The key areas where spending increased were on the cloud platform for solutions such as Traffic Management Plan in the UK and NG9-1-1 in the US, and other technology such as 1integrate, 1Data Gateway, 1Telecomms and 1Water. Amortisation of development costs was £1.6 million (FY 2022 £1.7 million).

Financing

The Group's financial position is supported by long-term bank loans. As the number of higher value sales contracts has increased, the Board decided to put in place a £3 million Revolving Credit Facility. The facility, arranged in June 2022, is committed for three years and priced on competitive terms. The facility was undrawn as at 31 January 2023 and 25 April 2023.

At the end of January 2023, the remaining principal balance outstanding on the long-term loans was £2.0 million (2022: £2.4 million). The amount repayable in FY 2024 is approximately €0.7 million (FY 2022: £0.6 million).  With a gross cash position of £5.0 million at 31 January 2023 (FY 2022: £5.6 million), a growing adjusted EBITDA and positive operating cash generation, the business is in a healthy financial position, which gives the Board the confidence to continue to invest.

Going forward, the Board and management teams are focused on increasing revenues, in particular recurring revenues, whilst improving the Group's profitability and cash generation. 

Alternative Performance Measures

Certain analyses include Alternative Performance Measures ("APMs") which are not defined by generally accepted accounting principles (GAAP) as defined under UK-adopted international accounting standards or other generally accepted accounting principles. We believe this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring our operating performance. Our management and Board of Directors uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Wherever appropriate and practical, we provide reconciliation to relevant GAAP measures.

APMs have been provided for the following reasons:

·      to present users of the financial statements with a clear view of what we consider to be the results of our underlying operations, aiding the understanding of management analysis and enabling consistent comparisons over time

·      to provide additional information to users of the financial statements about our financial performance or financial position

 

The following APMs appear in this document:

#	APM	Explanation of APM
1	Recurring revenue (s)	Recurring Revenue is the value of committed recurring contracts for term licences and support & maintenance recorded in the year.
2	Annualised recurring revenue ("ARR")	Annualised Recurring Revenue ("ARR") is the annualised value at the year-end of committed recurring contracts for term licences and support & maintenance.
3	Adjusted EBITDA	Adjusted EBITDA is a company-specific measure which is calculated as operating profit/(loss) before depreciation (including right of use asset depreciation), amortisation and impairment of intangible assets, share-based payment charge and strategic, integration, and other non-recurring items.
4	Operating cashflow	Operating cashflow is a company-specific measure which is calculated as cash generated from operations excluding cash flow on strategic, integration and other non-recurring items.
5	Free cashflow	Free cash flow is defined as net increase/(decrease) in cash for the year before cash flows from the acquisition of subsidiaries, cash flows from new borrowings and repayments of borrowings and cash flow from new share issue. But excludes lease liabilities.
6	Net cash	Net cash is gross cash less bank borrowings.

 

 

Stuart Ritchie
Chief Financial Officer

 

 

 

Consolidated statement of comprehensive income

For the year ended 31 January 2023

	Note	2023   £'000	2022 (restated)* £'000
Revenue	3	30,002	27,027
Cost of sales		(14,504)	(13,078)
Gross profit		15,498	13,949
Administrative expenses		(14,244)	(13,534)
		1,254	415
Adjusted EBITDA		4,997	4,182
Less: depreciation		(253)	(198)
Less: depreciation on right of use asset	11	(1,056)	(989)
Less: amortisation and impairment of intangible assets	6	(2,048)	(2,254)
Less: share-based payment charge		(192)	(326)
Less: strategic, integration and other non-recurring items	4	(194)	-
Operating profit		1,254	415
Finance income		19	14
Finance costs		(229)	(209)
Net finance cost		(210)	(195)
Profit before tax		1,044	220
Income tax credit	5	14	163
Profit for the year		1,058	383
Profit for the year attributable to:
Equity shareholders of the Parent		1,058	383
		1,058	383
Other comprehensive income
Items that may subsequently be reclassified to profit or loss:
Actuarial gains arising on defined benefit pension, net of tax		162	113
Exchange differences arising on translation of net assets of foreign operations		415	(246)
Other comprehensive income/(loss) for the year, net of tax		577	(133)
Total comprehensive gain for the year		1,635	250
Total comprehensive gain attributable to the
equity shareholders of the Parent		1,635	250

 

 

	Note	2023   £'000	2022 (restated)* £'000
Earnings per ordinary share attributable to the owners of the Parent during the year (expressed in pence per ordinary share):
Basic earnings per share	15	1.0	0.3
Diluted earnings per share	15	0.9	0.3
* The 2022 Consolidated statement of comprehensive income has been restated for the recognition of deferred tax.

                                                                                                Registered company number (England): 5429800

Consolidated statement of financial position                                                               

As at 31 January 2023

	Note	2023   £'000	2022 (restated)** £'000
Assets
Non-current assets
Intangible assets including goodwill	6	17,408	15,003
Property, plant and equipment		302	350
Right of use assets	11	1,609	1,747
Total non-current assets		19,319	17,100
Current assets
Trade and other receivables	7	14,151	12,271
Current income tax receivable		35	124
Cash and cash equivalents	8	5,036	5,623
Total current assets		19,222	18,018
Total assets		38,541	35,118
Liabilities
Current liabilities
Bank borrowings	9	(660)	(531)
Trade and other payables	10	(15,797)	(13,284)
Lease liabilities	11	(608)	(748)
Deferred consideration	12	(28)	(340)
Total current liabilities		(17,093)	(14,903)
Non-current liabilities
Bank borrowings	9	(1,322)	(1,861)
Lease liabilities	11	(1,077)	(976)
Deferred consideration	12	-	(27)
Defined benefit pension obligation		(1,154)	(1,276)
Deferred tax	13	(544)	(565)
Total non-current liabilities		(4,097)	(4,705)
Total liabilities		(21,190)	(19,608)
Net assets		17,351	15,510
Share capital and reserves
Share capital	14	20,155	20,150
Share premium account	14	30,488	30,479
Own shares held	14	(139)	(303)
Equity-settled employee benefits reserve		4,122	3,930
Merger reserve		16,465	16,465
Reverse acquisition reserve		(11,584)	(11,584)
Currency translation reserve		501	86
Accumulated losses		(42,180)	(43,236)
Purchase of non-controlling interest reserve		(477)	(477)
Total equity		17,351	15,510

 

** The 2022 Consolidated statement of financial position has been restated for the recognition of deferred tax.