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MICROLISE GROUP PLC
Interim / Quarterly Report • Sep 26, 2022
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Interim / Quarterly Report
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National Storage Mechanism | Additional information 
RNS Number : 5351A
Microlise Group PLC
26 September 2022
26 September 2022
MICROLISE GROUP PLC
("Microlise", the Company or "the Group")
Interim Results for the 6 months ended 30 June 2022
Continued Progress in line with Market Expectations
Microlise Group plc (AIM: SAAS), a leading provider of transport management software to fleet operators, announces its unaudited results for the 6 months ended 30 June 2022.
Financial Highlights
| H1 2022 | H1 2021 1 | Change % | |
| Revenue | £30.7M | £29.1M | 5% |
| Recurring Revenue | £19.8M | £18.0M | 10% |
| Gross Profit | £18.4M | £17.2M | 7% |
| Annual Recurring Revenue | £40.2M | £36.4M | 10% |
| EDITDA 2 | £4.1M | £4.1M | - |
| Operating Profit | £1.7M | £1.8M | (6%) |
| Profit before tax | £1.1M | £0.7M | 67% |
| Earnings per share | 0.94 | 0.64 | 47% |
| Cash balances | £15.8M | £13.2M 3 | 19% |
Operational Highlights
· More than 60 new customers added in the Period including PD Ports, K+N Logistics, H&M Distribution, Europa Worldwide Logistics
· Major renewals signed with Tesco and Asda in the UK. In Australia, a 5-year extension was signed with Coles, a supermarket chain with over 2,500 stores nationally
· Existing customer churn remains very low at 0.1%
· Growth in subscriptions of 3% during the six months to 570k
· Introduced TruVan - a new compliance software package for vans
· Successful return of the Microlise Transport Conference 2022 in May with over 1,000 delegates
Post Period End and Outlook
· Full-year revenue and profit expected to be in line with market expectations
· Progress made in the M&A area, with over 40 companies evaluated over the last 15 months
Nadeem Raza, CEO of Microlise, said: "Despite market headwinds, our team has proved resilient and continued to deliver in the first half of the year. With the transport industry's growing need for our technology and a solid and strengthening order book, we are confident of delivering a performance for the full year in line with market expectations."
1 H1 2021 refers to the 6 months ending June 30, 2021
- Earnings before interest, tax, depreciation, and amortisation
3 £13.2m Cash as at end of December 2021
For further information, please contact:
| Microlise Group plc | c/o SEC Newgate |
| Nadeem Raza, CEO / Bill Wynn, CFO | |
| Singer Capital Markets (NOMAD & Broker) Steve Pearce / James Moat / Harry Gooden |
Tel: +44 20 7496 3000 |
| SEC Newgate (Financial PR) Bob Huxford / Isabelle Smurfit / Max Richardson |
Tel: 020 3757 6880 Email: [email protected] |
About Microlise
Microlise Group Plc is a leading provider of transport management software to fleet operators helping them to improve efficiency, safety, and reduce emissions. These improvements are delivered through reduced fuel use, reduced mileage travelled, improved driver performance, fewer accidents, elimination of paperwork and delivery of an enhanced customer experience.
Established in 1982, Microlise is an award-winning business with over 400 enterprise clients. With 350 employees based at the Group's headquarters in Nottingham in the UK, the Company also has offices in France, Australia, and India, with a total global staff base of over 600.
Microlise is listed on the AIM market of the London Stock Exchange (AIM: SAAS) and qualifies for the London Stock Exchange's Green Economy Mark.
Chairman's Statement
Introduction
Microlise continues to make solid progress, both in terms of growth and toward meeting its strategic goals. The Company delivered revenue growth of 5% during the period, from £29.1m in H1 2021 to £30.7 million in H1 2022, while cash increased a healthy 19% during the six months under review, from £13.2m, as at 31 December 2021, to £15.8m, as at 30 June 2022.
It is testament to the staff and management of Microlise that this profitable growth has been delivered during a time of significant macro-economic disruption, which presented the Company with a global shortage of components and a challenging recruitment environment. Microlise had the foresight to take early action to mitigate these issues and has successfully navigated them since.
The disruption has also continued to affect the wider transport sector, which has had to contend with additional issues including increased fuel costs, driver shortages and a reduction in the number of new vehicles coming to market. Together, these have further reduced already tight profit margins for many haulage and fleet management companies. Microlise's leading solutions help these companies to reduce costs through improved planning, routing and safety as well as reduced fuel consumption, amongst many other benefits, and Microlise is delighted to be able to provide such essential assistance to its clients in these challenging times.
Microlise is committed to empowering operators to work as smartly, efficiently, and sustainably as possible. Through improved planning and efficiencies, our clients reduce distance travelled, fuel consumed and, therefore, harmful emissions.
Financial Performance
The Company continued to enjoy exceptionally high levels of customer retention, evidencing the mission critical nature of its products, during the Period. This underpinned solid financial performance with revenues rising 5% from £29.1m to £30.7m. Recurring revenues rose from £18.0m to £19.8m such that they now represent 64.7% of total revenues, up from 61.6% in H1 2021. Importantly, our cash position has been further strengthened, up 19% from £13.2m at 31 December 2021 to £15.8m at 30 June 2022, such that we are in an excellent position to be able to invest in some of the exciting opportunities we see to accelerate our growth plans. This was aided by exceptional cash generation during the period which grew by 68% from £3.4m in H1 2021 to £5.7m in H2 2022.
The Group is confident that trading at the half year stage is in line with meeting full year market expectations.
Governance
As Chairman, I am responsible for leading the Board and ensuring it is focused on strategic matters and that the highest corporate governance standards are adhered to. My fellow board members and the senior management of Microlise are also dedicated to ensuring the successful oversight of the business with the interests of our supportive shareholders always front of mind.
As part of our continuing commitment to strengthen our Governance, we welcomed Lucy Sharman-Munday to the Board in February 2022 as an independent Non-Executive Director. As Chief Financial Officer of AIM listed technology company Eagle Eye Solutions, Lucy brings considerable experience in software, finance and capital markets, and is proving a great asset.
In our recent trading update, released on 28 July 2022, we also announced the planned retirement of our Chief Financial Officer, Bill Wynn, which will take place in the Spring of 2023. The search for a replacement is already well underway and Bill will support the transition process of his successor.
Looking Ahead
With costs, complexity and competition on the rise for transport management companies, the need to deliver excellent customer service at a competitive price, and to rapidly scale up or down in response to consumer demand, is increasingly important. These factors are driving demand for end-to-end transport management technologies, such as those provided by Microlise, which is in a strong position to capitalise on growth opportunities within its fast-growing markets thanks to its proven and expanding product portfolio.
We have an increasingly strong balance sheet driven by excellent cash generation. This will allow continued investment into R&D to enable the extension of our product range and capability; the expansion into new geographies and adjacent markets, such as smaller fleets and vehicles; and provides the resources to make selective acquisitions that can accelerate our strategy, when opportunities arise.
Although challenges in the industry remain, Microlise has proven it is adept at meeting these, and increasingly so. The situation in Ukraine is not adversely affecting the Company at present, and, although micro-chip supply issues are now expected to remain until mid-2023, Microlise continues to successfully secure necessary components and has the resources to pay premiums where required.
We are delivering against the targets we have set for ourselves and remain confident of meeting market forecasts for the full year. The future looks brighter still for 2023, with increasing customer product demand driving order volumes, and the easing of many of the macro challenges, such as microchip shortages, expected later in the year.
As always, I pay particular tribute to our selfless staff who continue to face up to some of the most challenging circumstances our industry has had to deal with in many years and, through a combination of their positive can-do attitude, commitment to Microlise, and dedication to our customers, have again delivered a performance of solid growth.
Jon Lee, Non-Executive Chairman
CEO's Statement
The six months to 30 June 2022 was a period of substantial progress for Microlise. We further strengthened our global business through the addition of more than 60 new customers, and we are particularly proud that churn remained extremely low at 0.1%. We also introduced new products including TruVan which, as a compliance software package for vans and Light Commercial Vehicles (LCVs), also brought us into new markets. In addition, we saw the successful return of the Microlise Transport Conference in May of 2022 which, with over 1,000 delegates, was a resounding success and firmly places Microlise as a leading solutions provider that is central to the transport industry.
We continue to see strong fundamentals in terms of revenue and growth, with a 3% increase in subscriptions, a churn rate of 0.1% and a 10% increase in ARR run rate for the six-month period ended 30 June 2020.
Market
The market for our customers is being heavily disrupted however, with fleet operators under considerable financial pressures. Microlise's technology enables our customers to not only survive but thrive.
The tragic war in Ukraine, coupled with chip shortages, is impacting vehicle production as customers struggle to secure new vehicles. Operators are therefore having to run assets for longer, making solutions that can proactively manage fleets, such as those provided by Microlise, crucial to staying on top of maintenance, costs and service levels to their end customers.
Rising fuel costs also renders software that can manage driver performance increasingly essential. Approximately one third of a transport operators' costs is fuel, meaning even a small increase in fuel usage can have a disproportionately negative impact upon the economic viability of their business.
Driver shortages also means software solutions that can manage drivers become ever more vital, while regulations, driver safety and the need for visibility continue to drive mobility technology in transportation.
During Microlise's transport conference held in May, over 61% of the 1,000 delegates stated that better planning and optimisation will have the biggest impact to reducing costs. These are core elements to Microlise's suite of software solutions, with a new planning and optimisation product launched in late 2021 which is already gaining traction in the market.
Microlise Transport Conference
After a two-year hiatus as a result of the global pandemic, the Microlise Transport Conference made a successful return in May 2022. The conference is one of Europe's largest road transport events which this year included over 50 exhibitors, 40 speakers, including HRH Princess Royal, and over 1,000 delegates. They joined leaders from across the transport industry to discuss the current challenges and opportunities within the sector, while providing an opportunity for networking and collaboration.
Customer Base
We have a strong track record of building long-term relationships with our customers and growing our engagement over time, through product expansion across new functions and geographies. This is reflected in the number of contract extensions and renewals we have secured during the period.
Major multi-year renewals were signed with Tesco and Asda among several others, in the UK. In Australia we also signed a 5-year extension with Coles, a supermarket chain with over 2,500 stores nationally.
During the six months under review, we also added over 60 new customers, almost as many as the 65 secured in the whole of calendar year 2021. This strong performance highlights the increasing attractiveness of our offering, particularly in helping fleet operators minimise costs and protect margins in this challenging economic environment.
Notably, we won a contract with international bakery company Arytza in France, an important milestone in a key target market, where we are now building a strong pipeline for Q4. In addition, we signed contracts with customers including PD Ports, K+N Logistics, H&M Distribution and Europa Worldwide Logistics. As a result, the Company grew vehicle subscriptions by 3% to a total of 570k at period end.
Overall customer churn remained extremely low during the period at less than 0.1%. This excellent performance reflects the loyalty of our customer base as well as the importance of Microlise's award-winning technology platforms in ensuring the efficient running of their operations.
We continue to invest in our sales capacity, with a particular focus on developing international opportunities and on new markets such as smaller fleets and vehicles.
Product Offering
With fleet operators facing unprecedented rises in fuel prices, a shortage of drivers, and difficulties in replacing aging vehicles owing to supply problems, Microlise's solutions have never been of greater importance.
Our recently launched Planning & Optimisation module provides faster and more flexible route planning. Its ability to reduce driver hours and mileage, and therefore mitigate the impact of rising fuel costs, has been greatly welcomed by our existing customer base while attracting interest from potential new customers.
In addition, our new compliance software package TruVan, has opened a new compliance market for us in van and Light Commercial Vehicle ("LCV") Operators. TruVan includes an App and web-based 'back-office' management system, enabling van operators to comply with DVSA Best Practice and operating guidelines, while efficiently managing their fleets.
Strategic Focus
Our focus is on growth and ensuring our solution remains best-in-class for large HGV fleet operators. We invest heavily in product development as we look to bring new solutions to our platform that deliver significant cost and emission savings to our clients. In addition, we are expanding our product and services range to become more accessible for operators of smaller fleets with less than 500 vehicles. In order to achieve this, we have invested in growing our sales capabilities which has led to a strong pipeline where we are already closing deals.
Supply chain issues continue to delay new-vehicle delivery across the world, and, as a result, more and more operators are seeking to optimise the vehicles they currently have. We therefore remain focussed on international expansion to capitalise on the global opportunity, and we are able to report solid development across a number of geographies.
In the Middle East, we assisted MAN with the Dubai launch of MAN TG3 truck, and we are seeking to extend this into new geographies including Western and Central Africa. In addition, we are exploring new solutions for EV Fleets and piloting P&O with Emirates Logistics for Adidas across both India and the Middle East. In France, we signed a contract with Arytza and in the ANZ region, we secured a 5-year extension with the Australian supermarket chain, Coles.
Selective M&A
We have a robust pipeline of opportunities in M&A where we are engaged in several processes at present. We also continue to actively assess further potential acquisition opportunities, with a focus on companies that could expand our technological capability or increase our international presence. Progress is being made in this area and we have evaluated over 40 companies over the last 15 months.
Post period end, we have made a further investment in TrakM8 (TRAK) via a £1m convertible loan note to deliver a restructuring that would focus on core growth areas and accelerate route to profitability.
ESG
Microlise is continuing to develop its ESG credentials with projects underway to offset the Group's carbon footprint. Highlights include our plans to install solar panels at our Nottingham HQ and to increase the number of EV charging points for staff. We also continue to nurture the next generation of talent with new roles, apprenticeships and graduate schemes. We have welcomed 6 qualified software engineer apprentices, as well as a new Graduate Operations and Product programme being launched, with 4 new graduates entering the business to be trained over the next 12 months, including 13 new Software Engineering Graduates.
I am incredibly proud of the steps we have made and look forward to updating the market on our progress.
Outlook
Microlise's strong performance during a period of significant geo-political and macro-economic upheaval demonstrates the continued strong demand in the transport industry for our market-leading technology.
We continue to successfully navigate a course through the global microchip shortage to ensure we meet our customers' needs in a timely manner. We are already beginning to see improvements in the situation which we expect to have normalised by mid-2023, although the Board will continue to remain vigilant.
Looking ahead, Microlise is increasingly well-capitalised and well-positioned to be able to continue to invest in growth, expand our product portfolio and grow our strong customer base.
Despite market headwinds, our team has proved resilient and continued to deliver in the first half of the year. With the transport industry's growing need for our technology and a solid and strengthening order book, we are confident of delivering a performance for the full year in line with market expectations.
Nadeem Raza, Chief Executive Officer
CFO's Statement
The financial results for the six-month period to 30 June 2022 reflect a further period of profitable and cash generative growth for Microlise despite the challenges widely reported across all industry sectors.
Group Results
Revenue
Revenue for the 6 months ended 30 June 2022 was £30.7m, an increase of 5% (£29.1m in H1 2021). Recurring revenue increased 10% to £19.8m (H1 2021: £18.0m), representing 64.7% of total revenues (61.6% in H1 2021). New customer wins, together with growth in our existing customer's fleets resulted in 10% growth in Annual Recurring Revenue (ARR) to £40.2m as of 30 June 2022 from £36.4m at 30 June 2021. Non-recurring revenue for the period was £10.8m (H1 2021 £11.2m).
During the 6-month period, 60 new clients and a number of contract extensions and renewals were secured. In addition to winning new business and deepening existing accounts, the Group successfully maintained an extremely low rate of customer churn by value at 0.1% (FY 2021: 0.1%) reflecting the importance of Microlise's software solutions in our customers' operations.
Gross Profit
Gross profit for the period increased by 7% to £18.4m (H1 2021: £17.2m). This resulted in a slight increase in gross margins to 60% from 59% in H1 2021.
Operating Expenses
Despite the global uncertainties caused by current market conditions, the Group has continued to invest in product development, operations, and sales and marketing. Operating expenses in the 6-month period ended 30 June 2022 increased 8% to £14.6m (H1 2021: £13.5m). This cost represents employee costs, premises costs, marketing costs, research & development (net of capitalised costs), finance charges, and administration costs.
The 3% increase in staff costs in the 6 months ended 30 June 2022 to £12.5m (H1 2021: £12.2m) reflected standard annual pay awards, share based payments and increased commissions/ bonuses reflecting the increased new customer win rate and the Group's strong EBITDA performance. Marketing costs increased during the period by £0.5m due to the return (after a 3 year absence) of the Microlise Transport Conference. Administration costs increased during the period by £0.4m reflecting Microlise's costs of listed business status. The increase also included an average headcount increase in operations due to the strategy of bringing more installation work in-house. Average headcount in the period was 644 (H1 2021: 610) overall.
Capitalised development costs in the period were £0.8m (H1 2021: £0.6m), whilst amortisation of capitalised development costs in the period was £0.3m (H1 2021: £0.2m).
EBITDA and Profit Before Tax
EBITDA in the 6 months ended 30 June 2022 remained consistent at £4.1m (H1 2021 £4.1m), with EBITDA margin for the period at 13.4% (H1 2021: 14.1%). The decrease in the EBITDA % was a result of the planned increase in operating expenses summarised above. To provide a better guide to the underlying business performance, EBITDA excludes depreciation, amortisation, interest, and tax.
In the 6 months ended 30 June 2022 the profit before taxation was £1.4m (HY 2021: profit of £1.4m).
EPS and Dividend
The Group made a profit after taxation in the period of £1.1m (H1 2021: £0.7m), an increase of 67% over the same period in 2021. This increase comes in part due to a decrease in the taxation charge compared with H1 2021 which reflected a change in the corporation tax rates from 19% to 25% from April 2023 that was applied to deferred tax balances.
As a result of the increase in profit after taxation, the reported basic earnings per share increased to 0.94 (H1 2021: 0.64) and the diluted earnings per share increased to 0.93 (H1 2021: 0.64)
The Board still does not feel that it is an appropriate time to commence paying dividends, as the Company continues to invest in its growth strategy.
Group Statement of Financial Position
The Group had net assets of £72.8m at 30 June 2022 (30 June 2021: £57.2m), due to the repayment of the term loans and increased cash balances resulting from the IPO (£18.6m). Current assets increased by £5.2m to £39.3m at 30 June 2022, as a result of the strong operating cash flow in the year.
Total liabilities were down by 18% to £54.4m at the period end (30 June 2021: £66.1m) due mainly to the repayment of the term loans.
Cashflow and Net Cash
The Group ended the 6-month period to 30 June 2022 with cash of £15.8m, up 19% since 31 December 2021, beating the Board's expectations.
Overall net cash inflow for the period was £2.6m (30 June 2021: outflow of £0.7m).
Banking Facility
The Group has remained comfortably within its banking covenants which relate to available headroom and EBITDA performance. The Group agreed a £20.0m committed revolving cash flow facility with HSBC Bank PLC upon IPO. The Group has not utilised any of this facility to date. The Group's gross cash of £15.8m and the undrawn £20.0m facility gives the Group access to £35.8m of capital, which the Directors believe is sufficient in order to support Microlise's growth plans as first set out at the IPO in July 2021.
One of the main purposes of the IPO was to raise funds for acquisitions, and whilst discussions were underway, nothing was imminent at the time, so the Board took the decision to repay borrowings from the funds raised in the IPO in order in order to save interest costs in the short-term. The borrowings repaid could be reborrowed at any time via the revolving cash flow facility.
Bill Wynn, Chief Financial Officer
Interim unaudited Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2022
| Six months ended 30 June |
Six months ended 30 June |
||
| 2022 | 2021 | ||
| Note | £'000 | £'000 | |
| Revenue | 1 | 30,675 | 29,136 |
| Cost of sales | (12,322) | (11,928) | |
| Gross profit | 18,353 | 17,208 | |
| Other operating income | 459 | 379 | |
| Administrative expenses | (17,104) | (15,765) | |
| Operating profit | 1,708 | 1,822 | |
| Interest income | 1 | - | |
| Interest expense | (142) | (286) | |
| Share of loss of associate net of tax | (127) | (77) | |
| Profit before tax | 1,440 | 1,459 | |
| Taxation | 2 | (350) | (806) |
| Profit for the period | 1,090 | 653 | |
| Other comprehensive income for the period | |||
| Currency translation differences | 47 | (1) | |
| Total comprehensive income for the period attributable to the equity shareholders of Microlise Group PLC | 1,137 | 652 | |
| Earnings per share | |||
| Basic earnings per share (pence) | 3 | 0.94 | 0.64 |
| Diluted earnings per share (pence) | 3 | 0.93 | 0.64 |
Interim unaudited consolidated Statement of Changes in Equity
| Share Capital | Share Premium | Merger Reserve | Retained earnings | Total Equity | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | ||
| At 1 January 2021 | 44 | - | 55,172 | 1,320 | 56,536 | |
| Comprehensive income for the period to 30 June 2021 | ||||||
| Profit for the period | - | - | - | 653 | 653 | |
| Other comprehensive income | - | - | - | (1) | (1) | |
| Total comprehensive income for the period | - | - | - | 652 | 652 | |
| Bonus issue of shares | 55,172 | - | (55,172) | - | - | |
| Reduction of share capital | (55,114) | - | - | 55,114 | - | |
| Total transactions with owners | 58 | - | (55,172) | 55,114 | - | |
| At 30 June 2021 | 102 | - | - | 57,086 | 57,188 | |
| Comprehensive income for the period to 31 December 2021 | ||||||
| Loss for the period (after exceptional IPO costs) | - | - | - | (3,342) | (3,342) | |
| Other comprehensive income | - | - | - | (71) | (71) | |
| Total comprehensive income for the period | - | - | - | (3,413) | (3,413) | |
| Share based payment | - | - | - | 129 | 129 | |
| Issue of shares | 14 | 17,630 | - | - | 17,644 | |
| Total transactions with owners | 14 | 17,630 | - | 129 | 17,773 | |
| At 31 December 2021 | 116 | 17,630 | - | 53,802 | 71,548 | |
| Comprehensive income for the period to 30 June 2022 | ||||||
| Profit for the period | - | - | - | 1,090 | 1,090 | |
| Other comprehensive income | - | - | - | 47 | 47 | |
| Total comprehensive income for the period | - | - | - | 1,137 | 1,137 | |
| Share based payment | - | - | - | 181 | 181 | |
| At 30 June 2022 | 116 | 17,630 | - | 55,120 | 72,866 | |
Interim unaudited Consolidated Statement of Financial Position
as at 30 June 2022
| Note | 30 June | 31 December | 30 June | |
| 2022 | 2021 | 2021 | ||
| £'000 | £'000 | £'000 | ||
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 8,645 | 8,573 | 7,930 | |
| Intangible assets | 4 | 75,373 | 75,987 | 76,128 |
| Investments in associate | 1,719 | 1,846 | 1,773 | |
| Deferred tax | - | - | 808 | |
| Trade and other receivables | 2,285 | 2,710 | 2,600 | |
| Total non-current assets | 88,022 | 89,116 | 89,239 | |
| Current assets | ||||
| Inventories | 3,516 | 2,941 | 3,897 | |
| Trade and other receivables | 18,817 | 15,143 | 18,840 | |
| Corporation tax recoverable | 1,160 | 932 | 1,610 | |
| Cash and cash equivalents | 15,774 | 13,210 | 9,718 | |
| Total current assets | 39,267 | 32,226 | 34,065 | |
| Total assets | 127,289 | 121,342 | 123,304 | |
| Current liabilities | ||||
| Lease liabilities | (768) | (717) | (628) | |
| Borrowings | - | - | (2,338) | |
| Trade and other payables | (32,468) | (25,780) | (29,065) | |
| Total current liabilities | (33,236) | (26,497) | (32,031) | |
| Non current liabilities | ||||
| Lease liabilities | (817) | (994) | (343) | |
| Borrowings | - | - | (12,790) | |
| Trade and other payables | (15,092) | (17,312) | (16,224) | |
| Deferred tax | (5,278) | (4,991) | (4,728) | |
| Total non current liabilities | (21,187) | (23,297) | (34,085) | |
| Total liabilities | (54,423) | (49,794) | (66,116) | |
| Net assets | 72,866 | 71,548 | 57,188 | |
| Equity | ||||
| Issued share capital | 116 | 116 | 102 | |
| Share premium account | 17,630 | 17,630 | - | |
| Retained earnings | 55,120 | 53,802 | 57,086 | |
| Total equity | 72,866 | 71,548 | 57,188 |
Interim unaudited Consolidated Statement of Cash Flows
for the period ended 30 June 2022
| Six months ended 30 June |
Six months ended 30 June |
||
| Note | 2022 | 2021 | |
| £'000 | £'000 | ||
| Cash flows from operating activities | |||
| Cash generated from operations | A | 5,714 | 3,401 |
| Tax paid | (28) | (42) | |
| Net cash generated from operating activities | 5,686 | 3,359 | |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (764) | (481) | |
| Additions to intangible assets | (820) | (756) | |
| Purchase of subsidiaries (deferred consideration paid) | (1,000) | (1,000) | |
| Interest received | 1 | - | |
| Net cash used in investing activities | (2,583) | (2,237) | |
| Cash flows from financing activities | |||
| Interest paid | (135) | (233) | |
| Lease liability payments | (409) | (379) | |
| Repayment of bank loans | - | (1,061) | |
| Repayment of other loans | - | (195) | |
| Net cash used in financing activities | (544) | (1,868) | |
| Net increase/(decrease) in cash and cash equivalents | 2,559 | (746) | |
| Cash and cash equivalents at beginning of the year | 13,210 | 10,464 | |
| Foreign exchange gains | 5 | - | |
| Cash and cash equivalents at end of the year | B | 15,774 | 9,718 |
Notes to the interim unaudited consolidated statement of cash flows
for the period ended 30 June 2022
A. Cash generated from operations
The reconciliation of profit for the period to cash generated from operations is set out below:
| Six months ended 30 June |
Six months ended 30 June |
||
| 2022 | 2021 | ||
| £'000 | £'000 | ||
| Profit for the period | 1,090 | 653 | |
| Adjustments for: | |||
| Depreciation | 980 | 987 | |
| Amortisation | 1,434 | 1,293 | |
| Share based payments | 181 | - | |
| Net interest costs | 141 | 286 | |
| Share of loss of associate | 127 | 77 | |
| Tax charge | 350 | 806 | |
| 4,303 | 4,102 | ||
| Working capital movements: | |||
| Increase in inventories | (575) | (238) | |
| Increase in trade and other receivables | (3,249) | (1,849) | |
| Increase in trade and other payables | 5,235 | 1,386 | |
| Cash generated from operations | 5,714 | 3,401 | |
.
B. Analysis of net cash/(debt)
| At 1 January 2022 | Cash flow | Non-cash changes | At 30 June |
|
| 2022 | ||||
| £'000 | £'000 | £'000 | £'000 | |
| Lease liabilities | (1,711) | 409 | (283) | (1,585) |
| Liabilities arising from financing activities | (1,711) | 409 | (283) | (1,585) |
| Cash and cash equivalents | 13,210 | 2,559 | 5 | 15,774 |
| Net cash | 11,499 | 2,968 | (278) | 14,189 |
| At 1 January | Cash flow | Non-cash changes | At 30 June |
|
| 2021 | 2021 | |||
| £'000 | £'000 | £'000 | £'000 | |
| Bank loans | (15,990) | 1,061 | (19) | (14,948) |
| Other loans | (375) | 195 | (65) | (245) |
| Lease liabilities | (1,101) | 379 | (183) | (905) |
| Liabilities arising from financing activities | (17,466) | 1,635 | (267) | (16,098) |
| Cash and cash equivalents | 10,464 | (746) | - | 9,718 |
| Net debt | (7,002) | 889 | (267) | (6,380) |
Notes to the interim unaudited financial information
General information
The parent company is a holding company and its subsidiaries are telematics businesses providing technological transport solutions that enable customers to reduce costs and environmental impact by maximising the efficiency of their transportation. The company is a public limited company, limited by shares, incorporated and domiciled in England. The address of the registered office is Farrington Way, Eastwood, Nottingham, NG16 3AG.
Basis of preparation
This interim announcement and condensed consolidated interim financial information has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards issued by the International Accounting Standards Board, as adopted by the United Kingdom and as effective for periods beginning on or after 1 January 2022 ('IFRS').
In preparing these interim financial statements, the Board have considered the impact of any new standards or interpretations which will become applicable for the next Annual Report and Accounts which deal with the year ending 31 December 2022 and there are not expected to be any changes in the Group's accounting policies compared to those applied at 31 December 2021, a full description of which are contained in the financial statements for the period ended 31 December 2021 which are available on our website.
There are no new standards, interpretations and amendments which are not yet effective in these financial statements, expected to have a material effect on the Group's future financial statements.
The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 December 2022.
The financial information does not contain all of the information that is required to be disclosed in a full set of IFRS financial statements. The financial information for the periods ended 30 June 2022 and 30 June 2021 is unaudited and does not constitute the Group's statutory financial statements for the period.
The statutory audited financial statements for the eighteen months ended 31 December 2021 have been filed at Companies House. The auditor's report on those financial statements was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.
The interim financial information has been prepared under the historical cost convention unless otherwise specified within these accounting policies. The financial information and the notes to the financial information are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Group, except where otherwise indicated.
The policies have been consistently applied to all periods presented, unless otherwise stated.
Going concern
The group had cash balances of £15.8m at 30 June 22 and an undrawn revolving bank facility of £20 million. The facility may be used for general corporate and working capital purposes and for permitted acquisitions. All existing loans at 30 June 2021 were repaid from cash balances following the admission to AIM.
The Group has prepared forecasts for the period to 31 December 2024 and a range of sensitivities have been run on the working capital model. The directors consider a scenario in which the business will face liquidity issues or breach covenant conditions in respect of facilities is remote. As part of the sensitivity analysis the directors have considered the impact of a reduction in turnover from their principal customer and the impact on working capital and are satisfied that in such a scenario the Group has sufficient liquid resources to restructure and continue as a going concern servicing the remaining customer base.
In view of the funds and facilities available to the Group the directors consider that there is significant cash headroom in the forecasts and the going concern basis of preparation is therefore appropriate.
1. Segmental information and non-Gaap adjusted results
The Group operates in the telematics market and considers all revenue to relate to the same.
Revenue in respect of the set up, supply of hardware and software installation is recognised at a point in time. Professional services including project management, managed services and support services income is recognised over the period when services are provided.
| Six months ended 30 June 2022 |
Six months ended 30 June 2021 |
|||
| £'000 | £'000 | |||
| By type | ||||
| Revenue recognised at a point in time: | ||||
| Supply of hardware and installation | 9,595 | 9,506 | ||
| Revenue recognised over time: | ||||
| Professional services including project management | 1,242 | 1,670 | ||
| Managed service agreement income | 18,219 | 16,237 | ||
| Other support and maintenance services | 1,619 | 1,723 | ||
| 21,080 | 19,630 | |||
| 30,675 | 29,136 | |||
| By destination: | ||||
| UK | 27,812 | 27,237 | ||
| Rest of Europe | 684 | 577 | ||
| Rest of the World | 2,179 | 1,322 | ||
| Total revenue | 30,675 | 29,136 |
One customer contributed £9.6m and 31% of revenue to the six months ended 30 June 2022 (£7.7m and 26% to the six months ended 30 June 2021).
Adjusted results
EBITDA is a commonly used measure in which earnings are stated before net finance income, amortisation and depreciation as a proxy for cash generated from trading.
The group now qualifies for large company R&D tax reliefs with the RDEC credit included in other operating income above operating profit for the six months ended 30 June 2022 and in line with common practice is included in the Group's calculation of EBITDA.
| Six months ended 30 June 2022 |
Six months ended 30 June 2021 |
||||
| £'000 | £'000 | ||||
| Operating profit before interest and share of associate | 1,708 | 1,822 | |||
| Depreciation | 980 | 987 | |||
| Amortisation of intangible assets | 1,434 | 1,293 | |||
| Adjusted EBITDA | 4,122 | 4,102 |
The directors consider the Group to comprise two complementary segments in respect of fleet management services (Microlise) and tachograph specific software and analysis services, a segment acquired on 9 March 2020 (TruTac).
| Microlise | TruTac | Total Six months ended 30 June 2022 | Microlise | TruTac | Total Six months ended 30 June 2021 Total |
||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Revenue | 28,711 | 1,964 | 30,675 | 27,448 | 1,688 | 29,136 | |
| Depreciation and amortisation | 2,125 | 289 | 2,414 | 2,026 | 254 | 2,280 | |
| Operating profit | 1,400 | 308 | 1,708 | 1,671 | 151 | 1,822 | |
| Net interest | (139) | (2) | (141) | (286) | - | (286) | |
| Share of associate loss | (127) | - | (127) | (77) | (77) | ||
| Profit before tax | 1,134 | 306 | 1,440 | 1,308 | 151 | 1,459 |
2. Tax on profit
| Six months ended 30 June 2022 |
Six months ended 30 June 2021 |
|||
| £'000 | £'000 | |||
| Current taxation | ||||
| Current period overseas tax | (63) | - | ||
| (63) | - | |||
| Deferred taxation | ||||
| Origination and reversal of timing differences | (287) | (150) | ||
| Change in rate | - | (656) | ||
| (287) | (806) | |||
| Tax charge on profit | (350) | (806) |
The Finance Act 2021 enacted a corporation tax rate of 25% applying to taxable profits from April 2023 (19% applicable until March 2023). This has accordingly been applied at 30 June 2022 to deferred tax reversals expected to occur from that date.
On 23 September 2022 it was announced that this increase in tax rate is to be reversed, with the date to be substantively enacted yet to be confirmed. The financial impact of this rate change to the tax charge will be considered at that point and reflected at the relevant future time.
Factors affecting the tax for the period
The tax charge on the profit for the period differs from applying the standard rate of corporation tax in the UK of 19% (2021: 19%). The differences are reconciled below:
| Six months ended 30 June 2022 |
Six months ended 30 June 2021 |
|||
| £'000 | £'000 | |||
| Profit before taxation | 1,440 | 1,459 | ||
| Corporation tax at standard rate | 274 | 277 | ||
| Factors affecting charge for the period: | ||||
| Disallowable expenses | 63 | 42 | ||
| Deferred tax not previously recognised | - | (169) | ||
| Other differences including higher overseas tax rates | 13 | - | ||
| Effect of change in deferred tax rates | - | 656 | ||
| Tax charge on profit | 350 | 806 |
In addition, an RDEC credit of £263,000 is included in other operating income for the period ended 30 June 2022 (£290,000 for the six months ended 30 June 2021).
3. Earnings per share
| Six months ended 30 June 2022 |
Six months ended 30 June 2021 |
||
| Profit used in calculating EPS (£'000) | 1,090 | 653 | |
| Weighted average number of shares for basic EPS | 115,945,956 | 102,168,178 | |
| Weighted average number of shares for diluted EPS | 117,001,050 | 102,168,178 | |
| Basic earnings per share (pence) | 0.94 | 0.64 | |
| Diluted earnings per share (pence) | 0.93 | 0.64 | |
There were 2,087,935 share options in place at 30 June 2022 (2021: nil) of which 1,055,755 were potentially dilutive at their nominal exercise price and are included in the weighted average for diluted EPS.
4. Intangible fixed assets
| Goodwill | Customer relationships | Technology | Brands | Software | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Cost | |||||||
| At 1 January 2021 | 52,300 | 17,780 | 8,143 | 2,711 | 547 | 81,481 | |
| Additions | - | - | 614 | - | 142 | 756 | |
| At 30 June 2021 | 52,300 | 17,780 | 8,757 | 2,711 | 689 | 82,237 | |
| Amortisation | |||||||
| At 1 January 2021 | - | 2,375 | 2,046 | 395 | - | 4,816 | |
| Charge for the period | - | 569 | 590 | 90 | 44 | 1,293 | |
| At 30 June 2021 | - | 2,944 | 2,636 | 485 | 6,109 | ||
| Net book value | |||||||
| At 30 June 2021 | 52,300 | 14,836 | 6,121 | 2,226 | 645 | 76,128 | |
| Cost | |||||||
| At 1 January 2022 | 52,778 | 17,780 | 9,373 | 2,711 | 791 | 83,433 | |
| Additions | - | - | 803 | - | 17 | 820 | |
| At 30 June 2022 | 52,778 | 17,780 | 10,176 | 2,711 | 808 | 84,253 | |
| Amortisation | |||||||
| At 1 January 2022 | - | 3,514 | 3,230 | 575 | 127 | 7,446 | |
| Charge for the period | - | 569 | 702 | 90 | 73 | 1,434 | |
| At 30 June 2022 | - | 4,083 | 3,932 | 665 | 200 | 8,880 | |
| Net book value | |||||||
| At 30 June 2022 | 52,778 | 13,697 | 6,244 | 2,046 | 608 | 75,373 |
Intangible assets have arisen principally on acquisition with a continuing investment in technology and software.
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