MTEC Made Tech Group Plc

30 September 2024

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

MADE TECH GROUP PLC

("Made Tech" or the "Group")

FINAL RESULTS 2024

Substantial increase in Adjusted EBITDA with improving outlook

Made Tech Group plc, a leading provider of digital, data, and technology services to the UK public sector, is pleased to announce its audited final results for the year ended 31 May 2024 (the "Period").

Financial highlights

Strategic and Operational highlights

Post year end highlights and outlook

Rory MacDonald, CEO, said: 

"We are excited about both our near-term and long-term prospects. The timing of the general election has been a positive surprise, removing significant uncertainty for our clients and providing a clearer set of priorities.

The strong sales bookings achieved in the first four months of FY25 is encouraging and we expect this robust performance to continue throughout the financial year.  This optimism is reinforced by our recent contract win with the Department for Education, which highlights our ongoing progress and our ability to build valuable and long-term client relationships.

While we remain mindful of the broader economic challenges and upcoming Autumn budget, the steps we have taken to strengthen the organisation and prepare for the future, provide us with great confidence that we are well-positioned to seize emerging opportunities and drive continued success in the coming years."

Enquiries:

About Made Tech

Made Tech is a provider of digital, data and technology services, which enable central government, healthcare, local government organisations and other regulated industries to digitally transform.

Made Tech's purpose is to "positively impact the future of society by improving public services technology". To achieve this the company has four key strategic missions: Modernise legacy technology and working practices; Accelerate digital service and technology delivery; Drive better decisions through data and automation; and Enable technology and delivery skills to build better systems.

The Group operates from four locations across the UK - London, Manchester, Bristol, and Swansea.

More information is available at https://investors.madetech.com/.

CHAIR'S REPORT

I am pleased to present Made Tech's audited annual results for the year ended 31 May 2024. 

Summary of the year

The government procurement market for digital services in FY24 slowed in the run up to the UK general election and as a result sales bookings of £36.0m (FY23: £69.9m) were 48% down and revenue of £38.6m (FY23: £40.2m) was 4.0% down on the prior year but remained in line with market expectations.  However, it is encouraging that the Contracted Backlog at the end of the year was £65.6m, only 3% down on the prior year (FY23: £67.9m).

The Group has made excellent progress during the year increasing productivity within the business.  As a result, gross margins increased from 35.8% in FY23 to 36.3% in FY24, and Adjusted EBITDA increased from £1.5m (3.8%) to £2.4m (6.2%) over the same period.

Strategic delivery

After particularly strong sales growth over the past few years, sales activity has been more subdued during FY24, primarily due to the uncertainty created in the run up the general election and budgetary pressures within government.  The board is confident, however, about the long term growth prospects in the public digital services market and Made Tech's ability to deliver on those opportunities.

In FY24 the business has focused on improving profitability through increased productivity, driven primarily through improved capacity management, reporting and processes.   As we look to improve our quality of earnings by diversifying our customer base, increasing the proportion of revenue generated from longer term, fixed price and recurring projects, we have also continued to invest in developing our capability propositions and have seen particular success in growing our Data & AI and Managed Services practices. 

We continue to put the needs of our clients at the heart of what we do, working as a strategic partner to deliver effective and meaningful results at pace.  We focus on delivering value for money for our clients; independent customer feedback highlights how our clients value our proactive and independent contribution to solving their issues.  In short, we care about how we work with our clients and the outcomes we deliver.

We have invested in senior management and new commercial leads to help open up new markets and deepen our relationships with our clients.  Our business is structured around market verticals such as Public Safety & National Security, Healthcare & Life Sciences, and Energy, Utilities & Environment, which means that our teams can bring market expertise and insights to their clients and ensure that Made Tech's extensive capabilities are appropriately deployed.  We believe that our market focus aligns well with the stated priorities of the UK government and other public sector bodies.

In the Local Government & Housing sector, Made Tech is focused on delivering scalable SaaS solutions to address some of the issues faced by our clients in this fragmented market.  Owing to the longer sales cycles and time to market than originally anticipated the Company has written down the value of the investment it has made to date in its Housing Products.  Nevertheless, we continue to see opportunities in this market and are actively pursuing  the commercialisation of our existing products and looking to further develop our technology platform offerings.

Our people are fundamental to the success and sustainability of Made Tech. We rely on their skills, motivation and commitment to deliver services and solutions to our clients.  We continue to recruit talented individuals across the UK combining a regional hub-based hybrid working strategy, taking account of the needs of our people for flexible working patterns, whilst at the same time optimising the quality of service we are able to provide to our clients through an on-site presence.

Many of our staff who were with Made Tech at the time of our IPO in 2021 have been incentivised through the granting of restricted stock options.  From FY25 we are looking to launch a SAYE scheme for all eligible employees, to enable them to participate in the equity growth ambition of the Company.

Our financial position remains strong.  Made Tech is debt free, unlike many technology businesses, and our cash balance is robust at £7.6m at the end of FY24, providing more than sufficient funds to deliver our plans for future organic growth.  This financial strength gives us the flexibility to take advantage of opportunities as they arise.  In FY25, alongside a focus on growing our client base and revenues, we will further look to improve productivity and profitability and generate positive free cash flow. 

A responsible business

Made Tech's mission is to help deliver a future where public services are modern, secure and easy to adapt; enabled through transformed digital services.  In doing so, our aim is to improve the lives of millions of citizens by helping our clients deliver on their plans.  Alongside the needs of our investors and employees, the requirements of our clients and the communities we serve are paramount in setting our strategy.

We are committed to continuing to develop our environmental, social and governance priorities embedded within our overall strategy and as a fundamental part of what it means to be Made Tech. We are committed to sourcing, designing and offering services and products which support social responsibility and environmental sustainability.

We have an established ESG Committee, headed by Tim Bardell (Chief Delivery & Transformation Officer), and comprising enthusiastic volunteers from all across our group, voted for by their peers, to advise and assist management in incorporating social value initiatives into the overall strategic delivery of the Group.

We are proud to have achieved carbon neutral status for the second year running and we are busy implementing initiatives aimed at reducing our carbon footprint.  We have set the ambitious target of transforming our operations to be Carbon Net Zero by 2030 utilising all practical measures.  We will also work with our clients to help them reach their own social value targets.  We recognise the importance of creating a fairer and more equitable society.  We are proud that our gender, ethnicity, and other diversity measures remain materially better than the industry average for the technology sector.

Further details are provided in the Social Value report in the FY24 Annual Report.

The board

In February 2024, we were pleased to welcome Neil Elton to the board as Chief Financial Officer (CFO), replacing Deborah Lovegrove.  Neil brings extensive experience of managing professional services and software businesses and of scaling companies through organic growth, M&A and international expansion.  He was previously CFO of Learning Technologies Group plc and Science Group plc, both successful high growth AIM listed technology companies.

Deborah stepped down from the board at the end of January, having joined the Company at the time of its IPO.  The board thanks Deborah for her contribution to the Group over the previous two and a half years and wishes her every success in her next endeavours.

The board notes the recommendations of the Hampton-Alexander and Parker reviews in relation to increasing board and senior management gender and ethnic diversity, and it takes these into account when making appointments.  We have six board members of which three are Non-Executive Directors.  We note that Made Tech achieves the voluntary target set for FTSE100 and FTSE 250 boards of at least 33% of board positions being represented by women.

As a board, we take our governance responsibilities very seriously and believe that these allow the Group to pursue its strategy with pace and reduced risk.  The approach to our wide range of responsibilities is set out in the Corporate governance report in the FY24 Annual Report.  In line with best practice all directors will put themselves up for re-election at the forthcoming Annual General Meeting.

Current trading and outlook

The business saw minimal operational impact during the period in the run-up to the general election.  The new government has emphasised the significant role technology will play in delivering their priorities and we expect the Group to be well-positioned to capitalise on these opportunities. We anticipate this will lead to increased trading momentum for the Group over the coming years.

We have seen a strong sales performance in the first four months of the new financial year with sales bookings of more than £27.0m.  The Group has traded in line with management's expectations in the first quarter of FY25 delivering robust revenue and Adjusted EBITDA performance.  Cash at the end of August has increased to £8.6m.

In summary, we feel we are well placed to continue Made Tech's progress as an increasingly important provider of technology services and products to the UK public sector and we look forward to delivering long-term returns and value for all our stakeholders.  

Joanne Lake

Non-Executive Chair

​

​

CHIEF EXECUTIVE'S REVIEW

FY24 has brought both challenges and significant opportunities. While the digital transformation market encountered headwinds from economic pressures including inflation, rising interest rates, and slower growth, these pressures have only reinforced the urgent need for smarter, more efficient public services. Digital transformation remains the key driver of that efficiency, and we are well-positioned to support the public sector as it evolves to meet these demands.

Despite these difficulties, and after five years of rapid growth, during which we achieved a CAGR of 88% between FY19 and FY23, we have focused on strengthening our core proposition and preparing the business for the next wave of growth. This period has allowed us to transition key people, processes, and organisational structures; the themes of stabilisation and transition will be evident throughout this update.

Reflecting on the current landscape, it's reminiscent of FY19-a year when Made Tech started a significant growth trajectory. Much like then, we now face both challenges and tremendous opportunities within a renewed political landscape. Growth is not always linear, but we are confident that the strategic choices we are making today will position us to continue delivering long-term value for all.

Robust performance in challenging operating environment

Given the challenging operating environment Made Tech delivered satisfactory financial results for the year. We achieved revenue of approximately £38.6m, in line with consensus expectations.  Our adjusted EBITDA was £2.4m, slightly surpassing market expectations and representing a significant improvement from the previous year, with the margin increasing from 3.8% to 6.2%.

Our net cash position remains strong at £7.6m, compared to £8.5m in FY23, and is materially ahead of expectations. This reflects our effective cash management and operational efficiency.

New sales bookings totalled £36.0m, down from £69.9m in FY23, due to the challenging procurement environment. Despite this, our contracted backlog remains solid at around £65.6m, compared to £67.9m in the previous year, demonstrating our continued ability to secure and maintain valuable contracts.

Continuing our long-term client relationships

Throughout the year, client retention has been robust, with all key customers since our IPO continuing their active engagement with us. This ongoing partnership is a testament to the trust and confidence our clients place in our services, and we are immensely grateful for their continued support.

The size of contracts secured during this period varied significantly. We won a major contract valued at over £15m, while the remaining contracts were smaller, each under £5m. This mix of contract sizes reflects both the diversity of our offerings and the broad range of clients we serve.

In terms of revenue distribution, Central Government accounted for 73% (FY23: 72%), Health contributed 16% (FY23: 12%), and Local Government made up 11% (FY23: 16%) of our total revenue. This spread across sectors underscores our ability to deliver value across different parts of the public sector.

We also conducted a Customer Satisfaction (CSAT) survey during this period, achieving a score of 81%. We are pleased with this result as it reflects our commitment to maintaining high standards of service and effectively meeting our clients' needs.

Refresh of our strategic plan

During the year, we undertook a significant strategic review, aiming to align our long-term objectives with market opportunities. This process, conducted in close collaboration with our Board and external advisors, has resulted in a comprehensive long-term strategy designed to guide our growth over the coming years.

Our strategy is organised into three stages, each with its own focus and goals.  The first stage addresses our immediate priorities, setting the foundation for the next phases.  The second stage will build on this foundation, driving substantial mid-term growth, while the third stage is geared towards strengthening our competitive position and ensuring sustained success over the longer term.

We expect to host a capital markets event next year to provide deeper insights into our strategic plan, detailing how we intend to achieve our objectives and drive future growth.

Developing our service lines

Over the past year, our service line focus has shifted from investment to embedding the insights gained from previous initiatives.

Our Data & AI services remain a central focus, driven by sustained high demand. We have undertaken several key data projects, reflecting the growing interest in AI among our clients.

Our Managed Services offerings are now showing promising results, following investments in previous years. We have secured significant managed service contracts and developed a strong pipeline of opportunities. This service line continues to present an important opportunity for long-term, stable revenue growth.

Restructuring our sales organisation, to power the next wave of growth

Over the past 12 months, we have implemented significant changes to our sales organisation, all aimed at positioning the business for long-term success. A cornerstone of our strategy has been enhancing our access to senior client stakeholders. By building stronger relationships with key decision-makers, we are now better positioned to understand and respond to their complex needs, ensuring more impactful and strategic engagements.

We have also made pivotal appointments of senior sales leaders across various industry verticals, including Public Safety & National Security, Energy, Utilities and Environment, and Space & Defence. These leaders bring a wealth of expertise and industry-specific knowledge, enabling us to better serve our clients and drive growth in these critical areas.

Furthermore, we have comprehensively rebuilt our bid team, incorporating seasoned professionals with extensive experience in managing large-scale bids. This restructuring enhances our capability to pursue and secure high-value contracts, reinforcing our competitive edge in the market.

Together, these changes are designed to optimise our sales operations, improve our market positioning, and drive sustainable growth for the company.

Challenges building our software division

Building our software division has taken longer than we initially anticipated, reflecting the complexity and scale of the undertaking. Despite these hurdles, our commitment to developing a business that provides both software and services remains strong and we see software being a crucial component of our long-term strategy.

Over the past year, we have moved from the development phase to the commercialisation phase. This shift has proven more challenging than expected, largely due to the prevailing "change fatigue" in the market, which has extended our sales cycles. However, we continue to see strong interest in our products, underscoring their potential and value.

To address these challenges and drive our software business forward, we have made changes to our software division structure. Chris Blackburn (COO) has been tasked with leading these efforts as we head into FY25. His experience and insights are expected to be instrumental in refining our product strategy and execution.

Additionally, we have appointed an external board advisor whose expertise will complement our internal efforts and provide valuable perspectives as we continue to build and scale our software division.

Investing in our people

Our people are our greatest asset, and we remain committed to their continuous development. Over the past year, we invested substantial time in technical skill development across the organisation. Recognising the importance of leadership at all levels, we also introduced a leadership development programme aimed at equipping current and future leaders with the necessary skills to drive the company forward.

We have seen healthy growth and progression in recruitment and internal mobility. We promoted 54 individuals within the organisation, recognising their contributions and ensuring they are well-prepared for their new roles. Additionally, we welcomed 61 new hires to our team, bringing fresh perspectives and expertise.  Our staff attrition rate substantially improved to 19% in FY24 (FY23: 30%), and we are targeting a mid-teen attrition rate over the medium-term aided by enhanced employee engagement and development initiatives.

To further strengthen our engagement efforts, we successfully launched a People Forum, comprising employee representatives from various parts of the business. This forum is designed to foster open dialogue, enabling us to better understand and address the needs and concerns of our workforce. Through this initiative, we aim to create a more inclusive and responsive organisational culture.

Strengthening the board and executive, to drive our ambitious plans

To drive our long-term strategy effectively, we have made several changes to our senior leadership team, ensuring we have the right individuals in key roles. These appointments and changes are crucial as we position ourselves for future growth and navigate a dynamic market environment.

A key addition to our leadership is Neil Elton, who joined us as Chief Financial Officer in January. Neil brings substantial public market experience, which will be instrumental in refining our financial strategy and supporting our ambitious growth plans. Additionally, Wayne Searle, who joined us in June 2023, is now well-established within the business. His integration into our team has already proven beneficial, and his ongoing contributions will be pivotal as we continue to evolve and expand.

In parallel, we have been building the Made Tech Advisory Group to bring in expertise that aligns with our strategic priorities. We have made significant appointments, including leaders with extensive experience in the water industry, as well as a former Director General who has held several senior roles within central government. These additions will provide us with critical industry insights and strategic guidance, enabling us to better navigate the complexities of our operating environment.

An exciting near-term and long-term outlook

We are excited about both our near-term and long-term prospects. The timing of the general election has been a positive surprise, removing significant uncertainty for our clients and providing a clearer set of priorities.

The strong sales bookings achieved in the first four months of FY25 is encouraging and we expect this robust performance to continue throughout the fiscal year.  This optimism is reinforced by our recent contract win with the Department for Education, which highlights our ongoing progress and our ability to build valuable and long-term client relationships.

While we remain mindful of the broader economic challenges and upcoming Autumn budget, the steps we have taken to strengthen the organisation and prepare for the future, provide us with great confidence that we are well-positioned to seize emerging opportunities and drive continued success in the coming years.

Rory MacDonald 

Founder & Chief Executive Officer

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FINANCIAL REVIEW

Revenue

Group revenue for the year ended 31 May 2024 was £38.6m representing a reduction of 4% on the prior year (FY23: £40.2m).  The public sector procurement market for digital services was subdued during the year, primarily as a result of uncertainty created by the upcoming UK general election and budget pressures within government departments.

Despite this uncertainty, sales bookings totalled £36.0m (FY23: £69.9m) and at the year-end the Group had a Contracted Backlog of £65.6m, being only 3% down on the previous year (FY23: £67.9m).

The Group continued to see growth amongst its Central government customers offset by declines in local government.  Services accounted for almost all revenue with the balance represented by our early-stage SaaS product sales.

In line with our strategic objective of diversifying the range of services that we offer to our clients, we continued to invest in capabilities such as Data & AI and Managed Services, where we saw substantial year-on-year growth.

Gross profit

Despite the reduction in revenue, a competitive procurement market and inflationary cost pressures, the Group successfully increased gross margins for the year from 35.8% in FY23 to 36.3% in FY24.  This was accomplished in large part through improved forecasting and capacity management.  Total headcount reduced from 434 at 31 May 2023 to 364 at 31 May 2024, helping to further optimise staff utilisation on client projects.  We anticipate further productivity gains during FY25.

Adjusted EBITDA

Adjusted EBITDA for FY24 was £2.4m (FY23: £1.5m), an increase of 56% year-on-year.  The Adjusted EBITDA margin also increased to 6.2%, up from 3.8% in FY23.  This improvement in part reflects the increase in gross margin as well as lower costs in certain support functions as a result of targeted reductions in headcount.  Alongside these savings, the business has continued to invest in its client leads, enabling Made Tech to better support its clients and drive growth.

Operating loss

The operating loss for the year of £3.2m (FY23: £1.5m operating loss) is stated after a £0.1m share-based payment charge (FY23: £2.1m), depreciation of £0.4m (FY23: £0.4m), amortisation of £0.8m (FY23: £nil) and an impairment charge of £4.3m (FY23: £nil).  There were no other exceptional charges in the year (FY23: £0.6m).

At the beginning of the year, the Company commenced the commercialisation of a number of its product and service offerings that had been in development over the previous years.  As a result, the Company started to amortise a number of these intangible assets.  The amortisation charge in the year was £0.8m (FY23: nil). 

In the first half of the year, management impaired the Company's investment in its apprenticeship Academy, a program developed alongside government departments including the HMRC.  Although the IP will continue to be used by the business, the Board does not now view this as being a core revenue-generating offering.

A further review was undertaken at the end of the financial year, as a result of which management decided to impair the Company's investment in its SaaS product portfolio.  Although Made Tech continues to win new local government clients for its housing repairs SaaS solution, the sales cycle has proven to be more extended than originally anticipated.  As announced at the time of the Interim Results, the Company will continue to pursue the commercial roll-out and refinement of these SaaS products.  The total impairment charge for the year was £4.3m (FY23: nil).  The Company's investment in its service capabilities remains unaffected; the year-end carrying value of the Company's Capability IP is £1.1m (FY23: £2.5m).

The share-based payment charge for the period under IFRS 2 was £0.1m (FY23: £2.1m).  This charge related to awards made under the Long Term Incentive Plan ("LTIP") and the Restricted Share Plan ("RSP").  The year-on-year reduction is primarily as a result of the CEO and COO waiving their LTIP awards and other options that have lapsed.  It is anticipated that the share-based payment charge will increase in FY25 as new performance based LTIPs and an all-employee Sharesave scheme are launched.

Taxation

The total taxation credit was £543,214 (FY23: £72,000 charge), giving rise to an effective tax charge of 18% (FY23: 5%). The charge is lower than the UK standard rate of taxation due to the use of tax losses brought forward. In future years, we would expect the Group's effective rate of tax to move closer to the UK corporation tax rate.

Basic earnings per share

The statutory basic loss per share was 1.64p (FY23: loss of 1.07p per share).  Adjusted diluted EPS (see note 9) was 0.92p, 171% up on the prior year (FY23: 0.34p) primarily as a result of the increase in Group EBITDA.

Cash flow

Cash at the year end was £7.6m (FY23: £8.5m).  Net operating cash inflows in the year were £0.8m (FY23: £0.5m outflow).  Investment in intangibles was reduced substantially from £3.1m in FY23 to £1.3m, as the Company moved from development to commercialisation of its SaaS technology platform products.  The Company also invested £0.3m (FY23: nil) in an Employee Benefit Trust ('EBT') for the settlement of future vested share options.  As a result, the EBT holds 1.4% of  the issued share capital of the Company.

The Board anticipates that during FY25 the Group will generate positive free cash flow. 

Capital allocation, funding priorities and dividend

The Board remains committed to a capital allocation policy that prioritises investment in the business to drive growth by either investing in its own IP or through targeted acquisitions.  The Board believes that the opportunities ahead of us are significant and sees the government's increasing spend in digital as a long-term trend. 

The Group's current cash reserves provide sufficient capital to fund planned product development and working capital as the business continues to grow.  As at 31 August 2024 the Group cash position had increased to £8.6m (FY24: £7.6m).  The Company has no debt.  The Board will consider using debt financing as appropriate to finance inorganic growth opportunities on a prudent and sustainable basis. 

The Board does not anticipate paying a dividend in the near term as it prioritises its strategy for growth, but will keep this under review in the future.

Balance Sheet

The Group has a strong balance sheet with net assets of £12.5m (FY23: £15.2m) underpinned by £7.6m of cash at the year-end.  Trade debtors of £4.4m (FY23: £4.3m) are held primarily with government clients.  Debtor days increased from 39 to 42 during the year as we followed up on older outstanding debts.  Trade and other payables reduced from £4.7m in FY23 to £3.1m at the end of FY24.

Neil Elton

Chief Financial Officer

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1.    Company information

The consolidated financial information represents the results of Made Tech Group Plc (the "Company") and its subsidiary, together comprising the Group ("Made Tech Group Plc" or the "Group").

Made Tech Group Plc is a company incorporated and domiciled in England and Wales, registration number 12204805. The address of its registered office is 4 O'Meara St, London SE1 1TE.

Made Tech Group Plc is quoted on the London Stock Exchange.

The principal activity of Made Tech Group Plc (the "Company") is that of a holding company. The main trading company of the Group is Made Tech Limited (company number 06591591) and the principal activity of this company is a provider of digital, data and technology services to the UK public sector. Service offerings include digital service delivery, embedded capabilities, data infrastructure and insights and legacy application transformation.

2.    Accounting policies

Accounting convention

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. They have been consistently applied to the periods presented. The financial statements are presented in Pounds Sterling rounded to the nearest thousand (£'000) except where specified.

Basis of preparation of the consolidated financial statements

The Group financial statements have been prepared in accordance with UK-adopted International Accounting Standards and the Companies Act 2006. The Company financial statements have been prepared under FRS 102. Both financial statements have been prepared on the historical cost basis with the exception of certain items which are measured at fair value as disclosed in the principal accounting policies set out below. These policies have been consistently applied to all years presented unless otherwise stated.

Going concern

The Directors have considered the Group's cash flow forecasts and they have no grounds for concern regarding the Group's ability to meet its obligations as they fall due and continue to operate within the existing cash balance and working capital facilities, thus requiring no additional funding to maintain liquidity.

In reaching their decision to prepare the financial statements on a going concern basis, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least 12 months from the date of approval of the financial statement. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Standards and amendments to existing standards adopted in these accounts

In the current year, the Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 June 2023:

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company in the 31 May 2024 financial statements

At the date of authorisation of these financial statements, certain new accounting standards and interpretations have been published that are not mandatory for 31 May 2024 reporting periods and have not been early adopted by the Group. The Directors continue to monitor developments in the accounting standards they see as relevant, but do not expect that the adoption of these standards will have a material impact on the financial statements of the Group in the current or future reporting periods and on foreseeable future transactions.

Basis of consolidation

The Group's consolidated financial statements incorporate the results of the parent company and all of its subsidiary undertakings. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated on the date control ceases.

Inter-company transactions, balances and unrealised gains and losses (where they do not provide evidence of impairment of the asset transferred) on transactions between Group companies are eliminated.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group.

Revenue recognition

Revenue is the fair value of the total amount receivable by the Group for supplies of services. VAT or similar local taxes and trade discounts are excluded. The Group's source of revenue is from the provision of digital, data and technology services to the UK public sector and product subscription and support services.

The majority of the provision of services contracts are typically "time and materials" whereby the customer is contractually bound to pay for services for each hour or day spent in delivering a contractually agreed services scope. Materials are incidental expenses incurred whilst delivering the services. These contracts typically have no payment milestones or bundling with other services and have no variable element. Revenue is therefore recognised in line with the chargeable "time and materials" which are allocated to the contracted project. The Company recognises revenue each month once as it provides these services for the duration of the contract. At the balance sheet date, an asset is recognised for unbilled amounts for services provided yet to be invoiced. Payment for the services is based on the agreed payment terms.

For fixed-price service contracts, the company recognises the revenue when the performance obligation is satisfied, which may be by the completion and approval of milestones described and priced in the contract or based on the actual labour hours and costs incurred at the end of the reporting period when performance obligations over time criteria have been met.

For product subscription contracts the client pays fees at regular intervals to access the functionalities, support and maintenance of the software. Current contracts are recognised ratably over the contract term.

Revenue contract liability is recorded when cash payments are received in advance of satisfying the performance obligation. Contract liabilities are recognised in profit or loss in the period when the Group completes the agreed services to the customers. In all other cases payments are due from customers within 30-60 days (depending on the credit terms applicable) of the service being agreed and invoiced.

Interest income and expenditure are reported on an accruals basis.

EBITDA and adjusted EBITDA

Earnings before interest, taxation, depreciation and amortisation ("EBITDA") and adjusted EBITDA are non‑GAAP measures used by management to assess the operating performance of the Group. EBITDA is defined as operating profit before depreciation and amortisation. Exceptional items, amortisation of intangible assets, impairment and share-based payment charges are excluded from EBITDA to calculate adjusted EBITDA.

The Directors primarily use the adjusted EBITDA measure when making decisions about the Group's activities. As they are non-GAAP measures, EBITDA and adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.

Exceptional items

The Group's income statement separately identifies exceptional items. Such items are those that in the Directors' judgement are one off in nature or non-operating and need to be disclosed separately by virtue of their size or incidence. In determining whether an item should be disclosed as an exceptional item, the Directors consider quantitative and qualitative factors such as the frequency, predictability of occurrence and significance. This is consistent with the way financial performance is measured by management and reported to the Board.

Intangible assets

Internally generated intellectual property

An internally generated intangible asset consisting of intellectual property arising from development (or the development phase) of an internal project is recognised if, and only if, all of the following have been demonstrated:

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. Internally generated intangibles not yet in use are not amortised but are subject to annual impairment testing.

Internally generated intangible assets have been amortised over three to five years.

Research expenditure is recognised as an expense in the period in which it is incurred.

Tangible assets

Tangible assets are recorded at cost net of accumulated depreciation and any provision for impairment. Depreciation is provided to write off the cost of the asset less any residual value over its useful economic life in line with below. The residual values of assets are reviewed annually and revised where necessary. Assets' useful economic lives are as follows:

Furniture and fittings                                     25% reducing balance

Office equipment                                            3 years straight line

Leasehold improvements                            25% reducing balance

Right-of-use lease assets                             straight line over the lease term

Impairment

For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds the recoverable amount of the asset or cash-generating unit. The recoverable amount is the higher of fair value, reflecting market conditions, less costs to sell, and value in use based on an internal discounted cash flow evaluation. The cash flow evaluations are a result of the Directors' estimation of future sales and expenses based on their past experience and the current market activity within the business. All assets are reassessed and impairment losses previously recognised may be reversed where the recoverable amount exceeds the carrying value in subsequent periods.

Any impairment charge arising from the review of the carrying value of assets, where material, is disclosed separately on the face of the consolidated income statement.

Financial assets

Financial assets and liabilities are recognised when the Group becomes party to the contractual obligations of a financial instrument. They are measured initially at fair value, net of transaction costs. The Group subsequently classifies and measures its financial assets as either financial assets at fair value through profit or loss, at amortised cost, or fair value through comprehensive income, as appropriate. The classification depends on the purpose for which the financial assets were acquired. At the reporting year end the financial assets of the Group were all classified as loans or receivables held at amortised cost.

Trade receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers but also incorporate other types of contractual monetary assets.

They are initially recognised at fair value and measured subsequent to initial recognition at amortised cost using the effective interest method, less any impairment loss.

The Group's financial assets comprise trade receivables, other receivables (excluding prepayments) and cash and cash equivalents.

Trade and other receivables - impairment

The Group applies an expected credit loss model to calculate the impairment losses on its trade receivables. The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. Trade receivables at the reporting date have been put into groups based on days past the due date for payment and an expected loss percentage has been applied to each group to generate the expected credit loss provision for each group and a total expected credit loss provision has thus been calculated.

Financial liabilities

The Group's financial liabilities include trade and other payables and borrowings which include lease liabilities.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest-related charges are recognised as an expense in the income statement.

Trade payables are recognised initially at their fair value, net of transaction costs and subsequently measured at amortised cost less settlement payments.

Taxation

Current tax

Current income tax assets and liabilities comprise those obligations to fiscal authorities in the countries in which the Group carries out its operations. They are calculated according to the tax rates and tax laws applicable to the fiscal period and the country to which they relate. All changes to current tax liabilities are recognised as a component of tax expense in the income statement unless the tax relates to an item taken directly to equity, in which case the tax is also taken directly to equity. Tax relating to items recognised in other comprehensive income is recognised in other comprehensive income.

Deferred tax

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or, at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets, such as those resulting from assessing deferred tax on the expense of share-based payments, are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Provisions, contingent liabilities and contingent assets

Provisions are recognised when the present obligations arising from legal or constructive commitment resulting from past events will probably lead to an outflow of economic resources from the Group which can be estimated reliably.

Provisions are measured at the present value of the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date taking into account risks and uncertainties surrounding the obligation.

All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Employee benefits

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

Termination benefits are recognised immediately as an expense when the Group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Defined contribution pension plan

The Group operates a defined contribution pension scheme. The assets are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund.

The cost of pensions in respect of the Group's defined contribution scheme is charged to the income statement in the period in which the related employee services were provided.

Share-based payments

The Group operates equity settled share-based compensation plans for the remuneration of its employees.

All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability or sales growth targets).

All share-based compensation is ultimately recognised as an expense in the income statement with a corresponding credit to the share-based payment reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Fair value of the awards are measured using the Black-Scholes valuation model or Monte Carlo simulation when there are non-market vesting conditions of the shares issued. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options ultimately are exercised than originally estimated. The impact of the revision of the original estimates, if any, is recognised in the statement of comprehensive income over the remaining vesting period, with a corresponding adjustment to the share-based payment reserve.

Equity and reserves

Issued share capital

Ordinary shares are classified as equity. The nominal value of shares is included in share capital.

Share premium

The share premium account represents the excess over nominal value of the fair value of consideration received for equity shares, net of the expenses of the share issue.

Share-based payment reserve

The share-based payment reserve represents the total value expensed at the balance sheet date in relation to the fair value of the share options at their grant date expensed over the vesting period under the relevant share option schemes.

Accumulated deficit

The retained earnings include all current and prior period results for the Group and the results of the Group's subsidiaries as determined by the income statement net of dividends paid.

Dividends

Final equity dividends to the shareholders of the Group are recognised in the period that they are approved by shareholders. Interim equity dividends are recognised in the period that they are paid. Dividends receivable are recognised when the Group's right to receive payment is established.

3.    Judgements in applying accounting policies and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimations and assumptions that affect the amounts reported for assets and liabilities as at the year-end date and the amounts reported for revenues and expenses during the year. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, their historical experience and other factors including expectations of future events. Actual results may differ from the amounts included in the financial statements. The estimates and assumptions that have a significant risk of material adjustment to the carrying amount of assets and liabilities within the next financial year are summarised below:

Judgements in applying accounting policies

Development costs

Capitalisation of development costs in accordance with IAS 38 requires analysis of the technical feasibility and commercial viability of the project in the future. This in turn requires a long-term judgement to be made about the development of the industry in which the development will be marketed. Where the Directors consider that sufficient evidence exists surrounding the technical feasibility and commercial viability of the project which indicates that the costs incurred will be recovered they are capitalised within intangible fixed assets. The amount of the capitalisation is based on estimates to judge the percentage of the time relevant staff spend on projects. Where insufficient evidence exists, the costs are expensed to the income statement.

Sources of estimation uncertainty

Intangible assets useful life

The useful life of the Group's intangible assets has been estimated based on the classification of intellectual properties into two categories: Technology Platforms and Capability IP.  Management's judgement in this estimation process incorporates a comprehensive analysis of market conditions, potential client needs, competitive developments, and internal expertise to assess the obsolescence risk associated with the developed technology.

In accordance with IFRS, the Group will review the estimated useful lives of these intangible assets at least annually and adjust them as necessary to reflect changes in circumstances or expectations regarding their economic benefits. Please refer to note 10 for more details.

Impairment of intangible assets

Determining whether intangible assets are impaired requires an estimation of the value in use of the cash‑generating unit to which the intangibles have been allocated. The value in use calculations require an estimation of the future cash flows expected to arise from the cash-generating units and a suitable discount rate to calculate the present value.

An assessment of impairment of intangibles is performed if there is an indicator of impairment. The key estimate for the carrying value of the intangibles is the cash flows associated with the investment and the Weighted Average Cost of Capital ("WACC"). Each intangible is reviewed regularly to ensure that it generates discounted positive cash flows.

Where there is an indication of impairment, the investment is impaired by a charge to the consolidated income statement. The key area of uncertainty is revenue growth and WACC. Management performs sensitivity analysis to ascertain the level of growth rate and assumptions on the WACC that will start to impair the investment on a yearly basis. Please refer to note 10 for more details.

4.    Financial instruments - risk management

The Board of Directors of Made Tech Group Plc has overall responsibility for the determination of the Group's risk management objectives and policies. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board.

The Group does not enter into derivative transactions or trade in financial instruments and the Directors believe the Group is not materially exposed to commodity price risk.

The Group is exposed to the following financial risks:

The Group is exposed to risks that arise from its use of financial instruments. The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book value approximates to fair value.

Trade and other receivables are measured at amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period.

Trade and other payables are measured at amortised cost.

Financial instruments by category

The key risks to the Group and the policies and procedures put in place by management to manage them are summarised below:

Interest rate risk

The Group is exposed to cash flow interest rate risk from bank borrowings at variable rates. The Group's bank borrowings are disclosed in note 13. As at 31 May 2024 there are no loans outstanding (FY23: £nil); therefore there is no significant exposure to interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. The Group's net trade receivables for the two reported periods are disclosed in the financial assets table above.

The Group considers that its exposure to credit risk is negligible as it primarily carries out work for public sector entities without the risks attached to normal commercial credit sales.

The Directors do not consider that there is any significant concentration of risk within other receivables.

Credit risk on cash and cash equivalents is considered to be small as the counterparties are substantial banks with high credit ratings. The maximum exposure is the amount of the deposit. To date, the Group has not experienced any losses on its cash and cash equivalent deposits.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

Capital management

The Group's capital is made up as follows:

The Group's objectives when maintaining capital are:

The capital structure of the Group consists of shareholders' equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources and fundraising.

5.    Operating profit/(loss)

The operating profit/(loss) has been arrived at after charging/(crediting):

6.    Interest receivable/(payable)

7.    Exceptional items

There were no exceptional items in FY24.  In FY23 exceptional costs related to severance costs for exiting employees and restructuring costs relating to reorganisation improvements.

8.    Taxation

The following tax was recognised in the income statement:

The tax assessed for the year is different from the standard rate of corporation tax as applied in the respective trading domains where the Group operates.

The Group's tax charge can be reconciled to the profit/(loss) in the income statement and effective tax rate as follows:

Current taxes comprise the income taxes of the Group companies which posted a taxable profit for the year, while deferred taxes show changes in deferred tax assets and liabilities which were recognised by the Group on the temporary differences between the carrying amount of assets and liabilities and their amount calculated for tax purposes and, on consolidation adjustments, calculated using the rates that are expected to apply in the year these differences will reverse.

No deferred tax has been provided on share based payments amounting to £35,155.

At the reporting date, the Group has unused tax losses of £0.7m (FY23: £3.1m) available for offset against future profits. No deferred tax asset has been recognised in respect of these losses due to the uncertainty of the timing of future taxable profits forecast at the balance sheet date.

9.    Loss per ordinary share

Where a loss has been recorded the effect of options is not dilutive and therefore the basic and diluted figure is the same.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has potentially dilutive ordinary shares arising from share options granted to employees. Options are dilutive under the Group Restricted Share Plan ("RSP") where the exercise price, together with the future IFRS 2 charge of the option, is less than the average market price of the Company's ordinary shares during the year. Options under the LTIP schemes, as defined by IFRS 2, are contingently issuable shares and are therefore only included within the calculation of diluted EPS if the performance conditions, as set out in note 15, are satisfied at the end of the reporting period, irrespective of whether this is the end of the vesting period or not.

The calculation of adjusted earnings per share is based on the after tax adjusted operating loss after adding back certain costs as detailed in the table below. Adjusted earnings per share figures are given to exclude the effects of share-based payments and exceptional items, all net of taxation, and are considered to show the underlying performance of the Group.

The adjusted basic earnings per share is calculated by dividing the adjusted profit/(loss) after tax for the year by the weighted average number of ordinary shares in issue during the period.

10.  Intangible assets

Intangible assets relate to development activities to develop new software products (IP) to improve existing and/or create new products. All intangible assets have an identifiable future economic benefit to the Group at the point the costs are incurred.

The Group has classified its intangible assets into two types of intellectual property: Technology Platforms and Capability IP.  During the year the Group has capitalised costs relating to the ongoing development of its Technology Platforms, being SaaS solutions aimed primarily at the Local Government housing market.  After initial sales Made Tech has moved to the commercialisation phase of these products.  Technology Platforms comprise 5 CGUs; amortisation of four of the CGUs commenced in June 2023 as commercialisation of the products began and they are amortised over five years.  Personnel costs of £1,256,899 (FY23: £3,028,623) have been capitalised during the year related wholly to Technology Platforms.

Capability IP comprises 7 Cash Generating Units ("CGUs") based around some of the core capabilities of the Group such as Data & AI, and Transformation.  Amortisation of all Capability IP CGUs, other than Academy, commenced in June 2023 over a useful life of three years.

Intangible assets have been tested for impairment by assessing the value in use of the CGUs. The value in use calculations were based on projected cash flows over the estimated useful economic life of the assets with no terminal rate being applied. Varying growth rates derived from market demand and an assessment of the assets' development pipeline were applied. The annual growth rates assumed for Technology Platforms IP was between c.0% and c.40%, dependent on the specific SaaS product. An annual growth rate of c.8% was assumed for the Capability IPs, excluding the Academy which was assumed to generate no revenue, on a total basis.

The discount rate used to test the cash-generating units used the Group's pre-tax WACC of 40.2%, being the equivalent of a post-tax WACC of 16.5% (FY23: 12.4%).  The value in use calculations using the above growth assumptions indicated an impairment on all the Company's Technology Platforms and Academy Capability IP.  As a result an impairment charge of £4,314,690 has been booked in the year (FY23: nil).  Following the early commercialisation of the Technology Platforms it has become evident that the sales cycles to local government clients was longer than originally anticipated, thus reducing the contribution that the SaaS products were forecast to deliver over the next four years. Nevertheless the Company continues to pursue the commercialisation of the Technology Platform IP in what management view as a large, compelling and fragmented market.  Made Tech had invested in its Academy IP to operate as an apprenticeship provider, working alongside government departments including the HMRC.  However, changes in demand by government clients mean that the Board no longer views this as a core revenue generating offering and therefore as a result have impaired the full carrying value of the asset.

Additional sensitivity analyses were run on all the remaining Capability IP.  Assuming nil growth in Capability IP revenue over the remaining useful economic life of the intangible assets, and using a post-tax WACC discount of 16.5%, an additional impairment of c.£405,000 was indicated.  Assuming a 20.0% post-tax WACC and nil growth (with other assumptions remaining constant) an additional impairment of c.£22,000, when compared with sensitivity using the 16.5% post-tax WACC discount rate, was indicated.  Management does not consider that any reasonably possible changes in the assumptions would result in an impairment.  The assumptions used in the impairment review are subjective and provide key sources of estimation uncertainty, specifically in relation to growth assumptions, future cash flows and the determination of discount rates. The actual results may vary and accordingly may cause adjustments to the Group's valuation in future years.

11.  Tangible assets

12.  Leases

The Company leases office premises. Under IFRS 16 this lease has been classified as a right-of-use asset. The lease liability is included within tangible assets on the statement of financial position. The long-term lease ended in April 2024 and the new agreement was signed for 12 months. There are no other long-term leased assets.

Amounts recognised in the Consolidated income statement

The Consolidated income statement shows the following amounts relating to leases:

Any expense for short-term and low value leases is not material and has not been presented.

13.  Analysis of net debt

14.  Deferred tax

Deferred tax liabilities are analysed as follows.

Changes during each year are as follows:

15.  Share-based payments

In the year ended 31 May 2024 the Group recognised total expenses of £80,463 (FY23: £2,068,000) in respect of equity‑settled share-based payment awards under IFRS 2 Share-based Payment.

Details of the maximum number of ordinary shares which may be issued in future periods in respect of LTIP awards and RSAs outstanding at 31 May 2024 are shown below:

All forfeited options relate to employees who left during the period.

Share awards granted in the year ended 31 May 2024 were limited to below Board employees and structured as either performance related LTIPs or Restricted Share Awards.  The LTIP awards are based on the achievement of challenging performance criteria over the respective vesting periods as set out below.  Performance targets include absolute total shareholder return ('TSR'), EPS growth, and employee net promoter scores ('eNPS').  The likelihood of the performance criteria being achieved has been factored into the calculation of the share based payment charge.

Restricted Share Awards ('RSAs') vest annually based on continuing service but are not subject to other performance conditions.  As such, the IFRS 2 Share-based Payment fair value of each RSA award granted was equal to the face value of awards.  Details of the awards granted during FY24 are shown below.

All options over shares have a nil exercise price.

*The vesting of these LTIP awards is subject to the Group achieving the following performance targets:

**The vesting of these LTIP awards is subject to the Group achieving the following performance targets:

During the year Made Tech established an Employee Benefit Trust for the settlement of share option awards. The Group contributed £350,000 to the EBT during the year and the EBT acquired 2,402,738 shares in the Company. The EBT has distributed 289,580 shares in settlement of the exercise of options.

16. Related party transactions

Details of key management personnel's compensation are given in the Directors' Remuneration Report of the FY24 Annual Report.

There were no other related party transactions during the year ended 31 May 2024.

17. Post balance sheet events

There are no significant events after the balance sheet date to report.