TIDMTPX
RNS Number : 1192F
TPXimpact Holdings PLC
06 July 2023
6 July 2023
TPXimpact Holdings PLC
("TPXimpact", "TPX" or the "Company")
Unaudited preliminary results for the year ended 31 March
2023
Results in line with the trading update made on 30 January
2023;
FY24 outlook unchanged
TPXimpact Holdings PLC (AIM: TPX), the technology-enabled
services company focused on people-powered transformation,
announces its unaudited preliminary results for the year ended 31
March 2023.
FY23 Financial highlights:
-- Performance in line with market consensus(1)
-- Strong momentum in new orders with GBP115m won in the year,
including GBP36m in Q4
-- Revenue up 5.0% to GBP83.7m (2022: GBP79.7m)
-- Like-for-like revenue trends notably better in Q4 (-1.6%),
with momentum continuing into FY24 (+5% in first two months).
FY23 like-for-like revenues declined by 7.2%
-- Adjusted EBITDA(2) of GBP2.5m (2022: GBP12.2m)
-- Adjusted EBITDA margin of 3.0% (2022: 15.3%)
-- Reported operating loss of GBP(19.4)m (2022: operating profit
of GBP3.2m), after including GBP11.8m (2022: GBPNil) non-cash
impairment charge for goodwill/intangible assets
-- Adjusted profit before tax on continuing operations of GBP0.7m
(2022: GBP10.9m)
-- Reported loss before tax on continuing operations of GBP(20.5)m
(2022: profit before tax of GBP2.5m)
-- Adjusted diluted earnings(2) per share from continuing operations
of 0.7p (2022: 11.3p)
-- Reported diluted loss per share from continuing operations
of (21.1)p (2022: diluted earnings per share of 0.9p)
-- Net debt(1) as at 31 March 2023 of GBP17.5m (31 March 2022:
GBP10.1m)
-- New banking arrangements agreed, providing a solid foundation
for future goals
Operational and Impact highlights:
-- New strategy, vision and branding launched as "People Powered
Transformation"
-- 72% of FY23 revenues from public services (2022: 72%)
-- Staff retention rates showing marked improvement to current
annualised run-rate of 84%
-- Hub strategy enhanced with three new leases signed, including
a single London office
-- Integration of Peak Indicators and Swirrl acquisitions into
a new Data & Insights Division
-- Articles of Association amended so that our constitution
now requires the Directors to consider the interests of all
stakeholders in the Company, to support our journey to B-Corp
certification
-- Became a founding customer of CO2.com and have offset our
entire historic carbon liability
Post-period trading and outlook:
-- Trading for the first two months of FY24 in line with management
expectations, with like-for-like revenue growth of over 5%
-- Over GBP90m of new orders won in Q124 (including up to GBP49m
four-year contract with His Majesty's Land Registry (HMLR)
and up to GBP27.5m two-year contract with Department for
Education)
-- Over GBP80m of FY24 revenues are represented by committed
(backlog) spend
-- Net debt(1) at 31 May 2023 of GBP16.8m
-- FY24 outlook unchanged with like-for-like revenue growth
of 15-20% and Adjusted EBITDA margins of 5-6%
-- Our three-year plan targets an Adjusted EBITDA margin of
10-12% in FY26
(1) Consensus figures for FY23: Revenue GBP83m, Adjusted EBITDA
GBP2.5m (2) In measuring our performance, the financial measures
that we use include those which have been derived from our reported
results in order to eliminate factors which distort
period-on-period comparisons. These are considered non-GAAP
financial measures, and include measures such as like-for-like
revenue, adjusted EBITDA and net debt. All are defined in note
7.
Bjorn Conway, Chief Executive Officer, commented:
"After a challenging year, TPXimpact has developed a clear
strategy and a comprehensive three-year plan to leverage its strong
foundations of successful client delivery and new business
wins.
The start of FY23 marked the initiation of an internal change
program aimed at achieving robust top-line growth in the medium to
long term, through the consolidation of component businesses under
a unified brand.
However, the change program faced challenges, and there were
market disturbances due to national events and an uncertain
political landscape, leading to revised market forecasts throughout
the year. Despite these obstacles, I am pleased to report that the
business met the revised forecast, with a robust order backlog
exceeding GBP80m into FY24.
This achievement, driven by the exceptional performance of our
business unit management teams, provides a solid foundation for
improved business performance in FY24 and beyond. Since joining in
October 2022, I have been impressed by the capability, passion, and
commitment of our teams, as well as their positive impact on
clients' organisations. It underscores the immense potential within
TPXimpact to deliver value, foster entrepreneurialism, and achieve
long-term growth while maintaining a sense of purpose."
TPXimpact will be hosting a webinar for analysts at 9:30am
today. If you would like to register for the analyst webinar,
please contact tpx@almapr.co.uk .
The Group will also be hosting a webinar for retail investors at
1:00pm today. Retail investors can register for the webinar using
the following link: https://bit.ly/TPX_FY23_webinar
Enquiries:
TPXimpact Holdings
Bjorn Conway, CEO Via Alma PR
Steve Winters, CFO
Stifel Nicolaus Europe Limited
(Nomad and Joint Broker) +44 (0) 207 710 7600
Alex Price
Fred Walsh
Ben Burnett
Dowgate Capital Limited
(Joint Broker)
James Serjeant
David Poutney +44 (0) 203 903 7715
Alma PR tpx@almapr.co.uk
(Financial PR) +44 (0) 203 405 0209
Josh Royston
Kieran Breheny
Matthew Young
About TPXimpact
We believe in a world enriched by people-powered digital
transformation. Working together in close collaboration, we want to
help our clients reimagine their organisations, services and
experiences to accelerate positive change and build a future where
people, places and the planet are supported to thrive.
Led by passionate people, we care deeply about the work we do
and the impact we have in the world. Working alongside our clients
teams, we work to understand their unique challenges and find new
ways forward together; challenging assumptions, testing new
approaches and building capabilities, leaving them with the tools,
the insight and the confidence to continue iterating and
innovating.
Combining rich heritage and expertise in human-centred design,
data, experience and technology, we bring over 15 years experience
across the public, private and third sectors, creating sustainable
solutions with the flexibility to learn, evolve and change.
The business is being increasingly recognised as a leading
alternative digital transformation provider to the UK public
services sector, with c.72% of its client base representing the
public sector and c.28% representing the commercial sector.
More information is available at www.tpximpact.com.
Chairman's statement
Overview
FY23 has been a year of considerable change for TPXimpact in
which the Group faced a combination of market issues and
significant operational challenges as part of its integration
project. The Board introduced a new management team in Björn Conway
as Chief Executive Officer and Steve Winters as Chief Financial
Officer to continue the good work of our co-founders, Neal Gandhi
and Oliver Rigby.
I would like to reiterate my thanks to Neal and Olly for the
exceptional leadership they showed in setting out their vision for
TPXimpact to achieve its full potential through brand
consolidation, and for their recognition in stepping down that a
different type of leadership was required to take the Group
forward.
Since my update on the HY23 interim results in November 2022,
the focus for the Group has been navigating these internal
operational challenges as we continue our process of consolidating
under one brand. Nevertheless, TPXimpact's core go-to-market
proposition is unchanged, with our teams continuing to deliver
innovative end-to-end digital transformation across our four
divisions: Consultancy, Digital Experience (DX), Data & Insight
and International.
I am delighted with the way Björn and Steve have quickly
embedded themselves within the heart of the organisation and have
set about identifying those processes to help optimise our
transition to one brand, as well as engaging with our teams across
the Group. Following a tough first half which was significantly
impacted by the scale of our consolidation project, and with
trading below expectations into Q3, we were pleased to deliver a Q4
performance above our revised expectations, including a record
number of new business wins and the signature of two significant
contracts with two central government departments.
The Group continues to improve the efficiency of communication
between our teams and systems. The Board remains convinced that
this strategy to bring together our Group businesses under one
unified brand is the correct and necessary decision, enabling
TPXimpact to optimise its efficiency and support long-term and
scalable growth.
It has been a particularly challenging year for the Group, and I
would like to thank all our stakeholders - from our customers, our
valued employees, and our shareholders - for their continued
support throughout the year.
Market dynamics
Through its strong relationships across multiple sectors and
extensive expertise in digital transformation services, TPXimpact
is well-positioned in an attractive and rapidly expanding
market.
More than ever across the public sector there is a need for
organisations of all sizes to communicate more effectively and
achieve efficiency savings. Across this complex and vast landscape,
digital transformation services are poised to replace heritage and
legacy systems. Equally, for those organisations in the commercial
sector, there remains an ongoing need to drive efficiencies and
maintain a competitive edge over their peers. The Group will seek
to maintain a healthily diversified balance of work across Central
Government, Local Government, Health, Charitable and Commercial
sectors.
Our purpose
Despite the considerable change the Group has undergone
operationally, at its core TPXimpact remains a purpose-led
organisation committed to delivering a net benefit to the people,
places and wider planet in which we operate. This sense of purpose
is reflected in the values of the Group and through our colleagues,
who care deeply about the need to accelerate positive change across
society.
As part of our vision to support the next generation of talent,
we are pleased to continue working with our fantastic charity
partners; Apps for Good, Arkwright Scholars, In2Science and Telerik
Academy. Each of these partnerships, alongside our own flagship
Future Leaders programme have been supporting young people from
diverse and underrepresented backgrounds to obtain the skills and
support they need to be successful in the tech industry. This year
our programmes reached over 870 beneficiaries.
Corporate governance
Throughout the challenges of FY23 we have maintained continuity
as a Board. Neal Gandhi, founder and former CEO, joined the Board
in a non-executive capacity and Oliver Rigby, founder and former
CFO, provided transitional support and continues to support the ESG
committee.
The Board of TPXimpact is committed to enhancing the governance
of the organisation on an ongoing basis. We diligently monitor
market conditions and regularly evaluate the key risks that affect
the Group, while being mindful of the broader challenges faced by
our end markets and stakeholders.
We deeply appreciate the trust and support of our shareholders,
as we strive to create long-term value for them through
purpose-driven initiatives. Ensuring that our shareholders are
well-informed and actively involved is of utmost importance to us.
Therefore, we prioritise regular updates and aim to enhance
transparency in all our corporate communications.
People
The collective effort and commitment of all our colleagues
throughout the year has been instrumental in navigating the
challenges we faced, and I extend my gratitude to every member of
our team for their support.
The new vision and strategy for the business has helped to
re-engage employees and we are pleased to see the emphasis that the
new management team has placed on open and transparent
communication. The wider organisation has crowdsourced a new set of
values to guide decision-making and behaviours in a more integrated
Group.
Employee retention improved throughout FY23. The 12 month
run-rate based on Q423 was c.84% and this improvement has continued
into Q124. We are pleased to see the positive response and level of
applicants for the new roles we have created within TPXimpact as
the business grows to deliver the significant new contracts won in
the latter part of FY23 and post-period.
We are pleased to report that our continued focus on D&I has
seen progression during the period with our minority representation
at a senior level increasing from 8% to 11%. We are pleased with
the progress made and will continue to make TPXimpact a diverse and
inclusive workplace for all employees.
Alongside the enhancement of diversity and inclusion in senior
representation, we have achieved a reduction in both our gender pay
gap and median ethnicity pay gap over the past year. Although there
is more progress to be made in closing these gaps, our mean gender
gap currently stands at 15%, aligning closely with the UK average
for all employees in 2022 (14.9%).
We track employee satisfaction through regular pulse surveys and
promptly address any areas for improvement.
Looking ahead
We are seeing the benefits of our broadened range of services
coming through, enabling us to capitalise on the significant market
opportunity available as the ongoing investment in digital
transformation across both the public and commercial sectors
continues.
Increased demand for our services is already being seen through
the record post-period contract wins with the Department for
Education and His Majesty's Land Registry, highlighting the value
placed in our offering and the opportunity available as we increase
efficiencies and operate as a unified brand.
As we continue to progress against our strategy, we are
confident that we have the right team in place to achieve
sustainable growth in an expanding market and build on the momentum
seen so far in FY24.
Mark Smith
Chairman, TPXimpact
CEO Statement
After a challenging year, the Group now has a clear strategy and
three-year plan to build on the already strong foundations of
successful client delivery and new business wins
TPXimpact started FY23 with a plan to achieve strong top-line
growth in the medium to long-term through an internal change
programme to unify its component businesses under a single
brand.
As reported in the September 2022 trading update, several
challenges became evident as the change programme proceeded and our
markets were disturbed by national events and an uncertain
political landscape. As a result, our forecasts for the full year
were revised. These forecasts were revised again in January
2023.
I am pleased to report that the business achieved the revised
forecast with a strong order backlog of over GBP80m into FY24. This
was on the back of a good Q4 performance by the business unit
management teams and is a strong basis on which to build improved
business performance in FY24 and beyond.
The teams at TPXimpact deliver amazing work for our clients,
despite the business itself still requiring significant investment
and development to better support our teams as they deliver good,
predictable, outcomes for our stakeholders. The key challenge is to
improve revenue conversion through to profit.
We have established a three-year strategy and plan to enhance
appropriate governance, processes, systems, and inspiring
leadership at all levels within the business to improve ways of
working and, therefore, efficiency and profitability.
I am pleased with the progress the Group has made to date. We
remain confident in the medium to long-term prospects for TPXimpact
as we continue to appropriately integrate and streamline our
businesses to deliver our services more efficiently to our clients
- the organisations that underpin our society - and deliver
sustainable change and tangible positive impact.
Demand for TPXimpact's differentiated service offering brings
strong future growth opportunities
The market for TPXimpact's services and differentiated
proposition remains strong. In combination with a more stable
internal environment for our teams, this resulted in GBP115m of new
business wins in FY23 and a good start to FY24 with over GBP90m of
new business wins in the first quarter.
Operating under a single brand, TPXimpact has the scale to
assist clients with large and strategically important programmes as
well as offering the intimacy and adaptability to work alongside
clients to improve their engagement with citizens, customers, and
donors. We work right across the spectrum from early community and
customer engagement, through service design and into delivery, and
have the expertise and capability to deliver hybrid cloud solutions
and support complex legacy platforms alongside our sector rich
consulting capabilities.
In Central Government, we continue to see a substantial shift
towards digital transformation to streamline and optimise service
experiences and leverage Government data. Combined with the
increasing use of Digital Marketplace frameworks enabling TPXimpact
to compete directly with traditional large-scale suppliers this
provides a growing market for our valuable services. The potential
of our Central Government business and increasing client confidence
in TPXimpact is evidenced by the growing scale of our contract
wins, from low single digit millions at the start of FY23, to
multi-year and tens of millions at the beginning of FY24.
Our Local Government clients look to TPXimpact to help them be
future-ready and sustainable - whether that is accelerating the
adoption of technology and digital solutions, addressing net zero
targets, or improving financial resilience by helping to re-think
long-term planning approaches, identify savings and develop
flexible delivery models. Our work is led by data and insight and
we are pro-active in collaborating to tackle the most complex
client challenges. We have invested in our local Government client
facing teams to improve access to our services and support
growth.
In Health and Social Care, FY23 was dominated by the merger of
NHS Digital, NHSx and Health Education England into NHS England.
This diverted attention from delivery and in conjunction with
increased scrutiny of the move towards Integrated Care Systems
(ICSs) reduced the opportunities available for us to assist our
clients. We used this period to diversify our business into
frontline trusts and bring a wider range of capabilities to bear
from across TPXimpact to support a more design-led approach to
service transformation - a core, distinctive capability for
TPXimpact. We see Health and Social Care as an exciting growth area
over the next few years.
Our work with NHS Wales, delivered though our Red Cortex
business, continued to be very strong during FY23 due to our long
track record and deep relationships. We won additional contracts
and a place on a new digital transformation framework as TPXimpact.
We have seen some softness in spend at the start of FY24 but expect
normal spending patterns to resume in the second half of the
year.
In our Commercial sector, we see clients continue to prioritise
operational efficiencies leading to a rise in demand for hybrid
cloud solutions and a growing interest in Artificial Intelligence
(AI) driven by media coverage of tools like ChatGPT. In FY23, we
experienced strong demand from existing clients to develop
solutions for resilient, scalable, and secure cloud architectures
and for business intelligence expertise to enable them to make the
best use of their data. As we move into FY24, we are bolstering our
commercial client teams as we look to deploy our experience and
expertise with new clients.
Our fundraising, not for profit, and membership and visits
clients are the cornerstone of our Digital Experience (Dx)
business. FY23 saw charities face challenging economic times with
their audiences feeling the impact of cost-of-living pressures and
a reduction in donor numbers. TPXimpact supports our clients to
provide exceptional experiences and utilises insights from data to
inform audience needs and behaviours to optimise engagement.
Similarly in the memberships and visits sector, member engagement
and meaningful connections help organisations differentiate
themselves, and our deep understanding of their member communities
and needs, enables us to co-develop engaging on-line experiences
supported by our digital tools.
Strong delivery and growing client confidence across our
customer sectors is evidenced by increased engagement sizes and
backlog.
We aim to provide tailored, insight and craft led, high-value
work with, and for, our clients at a fair price that balances our
desire to deliver purposeful work within a commercially sustainable
business model.
Our new strategy underpins our continuing client success and
will simplify and improve the business
Our vision of the future is of a world enriched by what we call
"people powered digital transformation" where, with our help,
organisations improve lives in an equitable and responsible
way.
The main strategic effort is to provide our already successful
client-facing teams with efficient and effective support by
removing points of friction in our business and improving our
conversion of revenue to EBITDA. Our aim is to achieve 10-12%
Adjusted EBITDA margins within 3 years.
Working effectively across its business units, TPXimpact draws
together a unique blend of specialist capabilities to help clients
transform and harness the best of digital technologies. This
approach and the teams and capabilities that lie behind it are very
much in demand with clients seeking better ways to engage with
their customers, and to do so in a more cost-effective way.
The Change programme of early 2022 and subsequent Peak and
Swirrl acquisitions has left the business operating through 7
units:
-- The Consulting business unit
-- The Dx (Digital Experience) business unit,
-- The Data & Insights business unit, formed of the recently
acquired Peak and Swirrl businesses
-- Red Cortex
-- KITS (Keep IT Simple)
-- Questers
-- TPXimpact Norway
Integration within business units was partially complete at the
end of H1 FY23 and much of the work of the last few months has been
bringing teams within these business units together.
During the latter part of FY23 we undertook a number of
initiatives to improve the business:
-- implemented formal performance reporting and reviews underpinned
by budgets and business plans owned by Group businesses
-- improved the forward looking data and information available
to business leaders from our existing systems
-- established an Operational Board to coordinate change
and improve underlying processes and systems
-- recruited a new Chief People Officer at the end of Q3
to improve recruitment, ensure our team member proposition
is strong, equitable, and aligned with our values, and
reinvigorate our Employee Representative Groups
-- increased employee engagement through greater transparency
and access to senior management. As CEO, I communicate
to staff most weeks through a short video and members
of the senior leadership team chair our Employee Forum
by rotation
-- identified a new London HQ building to co-locate our teams
and rationalise our footprint. We also improved our Chesterfield
and Manchester hub facilities
-- commenced a market based pay project to start to tackle
inequalities inherent in a business formed of many acquisitions.
To achieve our vision and improve business operations we have
developed a three-year plan:
Year 1 : focus and balance - establish the Consulting business
as a scalable platform and complete the integration of three
smaller agencies as the Digital Experience business.
Year 2 : form and integrate - bring the Data & Insights, Red
Cortex and KITS businesses onto the Consulting platform as an
integrated Digital Transformation business.
Year 3 : grow and differentiate - as a simpler, more coherent,
and operationally mature business, accelerate our growth and
purpose-led differentiation.
This staged approach is designed to further unify the unique
capabilities of TPXimpact under a single brand, increase
efficiencies, and capitalise on the increasing market opportunity.
It also enables TPXimpact to become a platform for future growth
options, both organic and through acquisition.
As we move through the latter part of FY24 and into FY25, and
the work to simplify and improve the business progresses, we expect
the Group to deliver stronger and more predictable performance.
Underpinning our vision and strategy we have developed a set of
values that help guide all team members in the decisions they make
day-to-day with clients and colleagues. The way our values show up
in our work was crowdsourced from TPXimpact team members and
collectively are our 'PACT':
Purpose - positive change with measurable impact
Accountability - self organisation and accountability
Craft - bringing our best capabilities to bear through a shared
vision of excellence.
Togetherness - long lasting relationships built on honesty,
openness, and trust.
Our purpose in action (ESG)
TPXimpact has been formed on a solid foundation of shared
values. Our people, our clients and our investors are attracted to
us because of this commitment to social responsibility. Our shared
belief that the business that we are building is a good one, that
will positively impact all stakeholders, has been invaluable
through a challenging period of change.
This year we have seen a huge acceleration in Social Value
commitments being embedded into our client contracts, bringing our
commercial and ESG work closer than ever before. A key tenet of our
work over the next year is better integration and balancing our
purpose with commercial outcomes.
We continue to set ambitious targets that ensure our business
operations are positively impacting all stakeholders; investing in
innovative carbon measurement, reduction and removal programmes,
ensuring that we are inclusive by design at every stage of the
employee lifecycle and supporting our communities where possible
with time, skills, funding and opportunities. We fulfilled our
commitments to fully offset our historical CO2 emissions, ran a
successful Future Leaders programme and donated over 2,500 hours
through volunteering programmes.
This year, as we prepare for B Corp certification, we have
formalised our commitment to all stakeholders by amending our legal
Articles of Association. These now enshrine our purpose-led
approach into the legal structure of the business. As ever, we are
committed to complete transparency when it comes to our ESG
performance and we have made excellent progress this year across
People, Planet and Places.
Future opportunities
Our current trading performance is encouraging, but there is
still work to do to improve margin conversion and
predictability.
As we progress against our strategy and improve the operational
structure of the Company, we are putting in place the necessary
measures to ensure TPXimpact will see growth driven by increasing
demand for our services within the market. I am proud of how our
people have faced the challenges during the period and I have every
confidence that we are developing a strong team to achieve
sustainable growth in the future.
Investment in digital transformation is continuing to grow at
pace in the public and commercial sectors and it has become clear
that this is now a necessity for all modern businesses. TPX has the
right portfolio of service offerings to capitalise on the growing
market demand for digital transformation and we have confidence in
the prospects for the Group moving forward.
Post-period we were pleased to announce two digital
transformation contracts with the Department for Education and His
Majesty's Land Registry that will deliver a cumulative value of up
to GBP77 million over a four-year period. The successful execution
of these contracts, which reflect the capabilities we now possess
through our consolidated service offering, represent the increasing
momentum for the Group as we take on larger contracts and give the
Board confidence in the Group's medium to long term prospects.
Through our vision of a 'world empowered by digital
transformation' and our strategy to simplify, streamline, and
balance our purpose and commercial outcomes, we will build a
scalable, coherent and differentiated business capable of
sustaining 10-15% CAGR revenue growth and 10-12% Adjusted EBITDA
margin whilst delivering great outcomes for our clients, people,
places and the planet.
Bjorn Conway
CEO, TPXimpact
Financial review
Prior period comparatives have been restated to exclude the
results of Greenshoot Labs Limited, which was disposed of in May
2022.
Reported revenues were up 5.0% to GBP83.7m, reflecting the
contribution of acquisitions, including Peak Indicators Limited and
Swirrl IT Limited both of which completed in April 2022 (and which
are now fully integrated into a new Data & Insights division),
and RedCortex Limited which completed in December 2021. The
performance of these businesses was very encouraging, with combined
like-for-like revenue growth of almost 30% in the year.
Group revenues were, however, down 7.2% on a like-for-like
basis. A number of factors contributed to this performance,
including a lower-than-normal order book in certain parts of the
business as they entered the financial year and client delays in
implementing projects, which especially impacted Q2 and Q3.
Sequentially, like-for-like revenue fell by 1.6% in Q1, 11.2% in
Q2, 14.6% in Q3 and 1.6% in Q4.
New business wins showed increasing momentum in the second half
of the year with GBP41m in Q3 and GBP36m in Q4, and GBP115m in
total for the year. Since year-end, this encouraging trend has
accelerated even further, with new orders in the first quarter of
FY24 of over GBP90m, largely due to two significant wins: up to
GBP49m with His Majesty's Land Registry (HMLR) over four years and
up to GBP27.5m with the Department for Education over two years,
both of which commenced in May 2023. These wins demonstrate the
value our increasing scale can offer our clients, especially in the
key strategic sector of Central Government.
Public sector clients represented 72% of revenue in the year
ended 31 March 2023 and our top 10 clients represented 39% of
revenue compared to 42% last year.
Gross profit of GBP20.9m was down 14.3% from GBP24.4m on a
reported basis and down over 27% on a like-for-like basis. Cost of
sales was GBP62.8m, an increase of 13.6% on a reported basis and
2.4% on a like-for-like basis, again reflecting the impact of
acquisitions. Gross margins therefore reduced to 25.0% from 30.6%
last year, and from 32.0% on a like-for-like basis.
The Group continually assesses the appropriate mix of permanent
headcount and contractors within cost of sales, with a view to
optimising efficiency in servicing the needs of our clients. In the
first half of the year, however, this efficiency was more
challenging to achieve due to client delays in implementing
projects, which impacted utilisation rates, particularly in our
Consulting division (40% of Group revenues). In view of the level
of new business won in the second half of the year, Consulting has
embarked on a major recruitment campaign to expand permanent staff
resource, although the full benefit of this will not come through
until FY24.
A new benefits package for permanent staff was introduced in
April 2022, which included increases in holiday entitlements,
pensions and other benefits. These enhanced benefits, together with
the effect of salary reviews in March 2022, impacted gross margins.
Nevertheless, management remain committed to offering our staff a
highly attractive benefits package as one of a number of measures
to attract and retain talent, and differentiate TPXimpact as an
employer which truly values the contribution and well-being of our
staff.
Utilisation rates improved markedly in Q4 and we are targeting
continued improvement in FY24 and beyond. The turn-around in Q4 was
entirely attributable to the tenacity and commitment of our people
who are devoted to delivering meaningful insight and value to our
clients. The healthy order book, combined with higher utilisation
rates and capacity, should lead to improved gross margins in FY24.
We are also seeing signs of improved staff retention rates over the
last six months, particularly in Consulting, our largest
business.
On a reported basis, the Group made an operating loss of
GBP(19.4)m compared with an operating profit of GBP3.2m last year.
This reflects the GBP3.5m reduction in gross profit explained
above, as well as the effect of administrative costs increasing to
GBP40.8m from GBP21.7m last year. Administrative costs include
GBP11.8m (2022: GBPNil) of non-cash impairment charges in relation
to goodwill and intangible assets recognised on past acquisitions,
due to management's reassessment of the likely future performance
of certain businesses in the Group.
Staff costs included in administrative costs increased to
GBP12.6m (2022: GBP9.0m), reflecting the acquisitions of Peak
Indicators and Swirrl IT, as well as a continued investment in
talent to support the needs of the business going forwards. On a
like-for-like basis, total Group headcount of 798 (on an FTE basis)
at 31 March 2023 compares with 659 people at 31 March 2022, an
increase of 21.1%. Including contractors, the Group's aggregate
workforce is currently approximately 1,100 people.
Administrative costs also include GBP2.5m of restructuring costs
(2022: GBP1.8m) arising from integration and restructuring actions
aimed at improving the long-term health and efficiency of the
business and GBP7.1m (2022: GBP5.9m) of depreciation and
amortisation charges, primarily in relation to acquired intangible
assets, previously recognised on acquisitions.
Adjusted EBITDA of GBP2.5m compares with GBP12.2m last year,
representing a margin of 3.0% against 15.3%. A reconciliation of
Operating (loss)/profit to Adjusted EBITDA is provided in Note 7 to
the unaudited preliminary results.
The Group made a reported loss before tax on continuing
operations of GBP(20.5)m in the year (2022: profit of GBP2.5m), and
an adjusted profit before tax on continuing operations of GBP0.7m
(2022: GBP10.9m). Finance costs were GBP1.1m in the year (2022:
GBP0.7m), reflecting both higher net debt and increased interest
rates.
Corporation tax amounted to a credit of GBP1.5m (2022: charge of
GBP1.7m) due to the decrease in profitability of the Group.
Adjusted profit after tax on continuing operations was GBP0.6m
(2022: GBP10.0m).
The disposal of Greenshoot Labs gave rise to a gain on disposal
of GBP1.6m which has been included in the income statement within
income from discontinued operations.
Reported diluted earnings per share from continuing operations
for the year was a loss of (21.1) pence per share (2022: earnings
of 0.9 pence per share), reflecting the decrease in profitability
in the year. On an adjusted basis, diluted earnings per share on
continuing operations was 0.7 pence per share (2022: 11.3 pence per
share).
During the year, the Board declared an interim dividend of 0.3
pence per share (2022: 0.3 pence per share), which was paid on 27
January 2023. In view of the Group's financial performance in the
second half of the year, no final dividend will be declared or paid
(2022: 0.6 pence per share). Therefore, total dividends declared
and paid in respect of the year ended 31 March 2023 were 0.3 pence
per share (2022: 0.9 pence per share). The Board is keen to
reinstate a dividend when appropriate and will continue to keep
dividend policy under review.
Cash flow and Net Debt
Net debt (excluding lease liabilities) at 31 March 2023 was
GBP17.5m compared with GBP10.1m at 31 March 2022. The increase in
net debt in the year of GBP7.4m includes GBP2.0m cash paid for
acquisitions (net of cash acquired), GBP1.5m of corporate taxes
paid, GBP1.1m of interest costs paid, GBP0.8m of dividends paid,
GBP0.6m of capital expenditure (including intangible assets) and
GBP0.5m of share repurchases into the Group's EBT. Working capital
improved slightly year on year.
The Company secured a waiver of its lending covenants from its
bankers at 31 March 2023 and agreed a further waiver at 30 June
2023. Amended covenants (based on minimum liquidity and Adjusted
EBITDA levels) will apply until the quarter ending 30 September
2024, at which time the original leverage metrics will be
reinstated (Net debt to Adjusted EBITDA of 2.5x and Adjusted EBITDA
to interest cover at 4.0x). These new lending arrangements provide
renewed stability and a sound basis for the business to reach its
performance goals.
Current trading
For the first two months of FY24, trading was in line with
management expectations, with like-for-like revenue growth of over
5%. With new business wins of over GBP90m in the first quarter, we
are seeing increased momentum in new orders and are well-positioned
for top-line growth in both the short and long term. At the same
time, management are very aware of the need to convert top-line
growth into meaningful margin improvement and have initiated a
number of measures focussed on efficiency, cost control and
profitability.
Net debt (excluding lease liabilities) was GBP16.8m at 31 May
2023, a GBP0.7m decrease on 31 March 2023, largely due to a
continued focus on working capital management. The last remaining
earnout liability in respect of historical acquisitions was settled
in shares on 6 June 2023.
Outlook
There is no change to the Group's previously published targets
for the year ending 31 March 2024, with like-for-like revenue
growth of 15-20% and an Adjusted EBITDA margin of 5-6%, with margin
improvement expected to be weighted to the second half of the year.
Committed (or backlog) revenues in relation to the current
financial year are over GBP80 million, significantly higher than at
the same time last year.
With respect to FY25, management continue to target
like-for-like revenue growth of 10-15% and a further improvement in
Adjusted EBITDA margin of 2-3% on top of that targeted for FY24.
Based on our three-year plan, we are targeting an Adjusted EBITDA
margin of 10-12% in FY26.
TPXimpact has entered the new financial year with renewed
vigour, whilst recognising there is scope to improve our
operational processes to enhance profitability, and respond
positively to a challenging wider economic environment. We continue
to believe the digital transformation market in the UK - in both
the public and private sectors - remains attractive, with plenty of
potential for continued growth, and that the Group is well-placed
to take advantage of these trends.
Steve Winters
CFO, TPXimpact
Consolidated Income Statement
For the year ended 31 March 2023
Unaudited Audited
2023 2022
GBP'000 GBP'000
Revenue 83,680 79,709
Cost of sales (62,775) (55,341)
Gross profit 20,905 24,368
Administrative expenses (40,789) (21,738)
Other income 519 579
Operating (loss)/profit (19,365) 3,209
Finance costs (1,105) (683)
--------------------------------------- ---------- ---------
(Loss)/profit before tax from
continuing operations (20,470) 2,526
Taxation 1,467 (1,706)
--------------------------------------- ---------- ---------
(Loss)/profit after tax from
continuing operations (19,003) 820
Profit/(loss) after tax from
discontinued operations 1,445 (723)
--------------------------------------- ---------- ---------
Net (loss)/profit (17,558) 97
Other comprehensive income/(loss):
Exchange difference on translation
of foreign operations 20 (226)
--------------------------------------- ---------- ---------
Total comprehensive loss for
the period (17,538) (129)
Earnings per share from continuing
and discontinued operations
Basic (p) (19.5p) 0.2p
Fully diluted (p) (19.5p) 0.1p
Earnings per share from continuing
operations
Basic (p) (21.1p) 1.0p
Fully diluted (p) (21.1p) 0.9p
Consolidated Statement of Financial Position
At 31 March 2023
Unaudited Audited
2023 2022
GBP'000 GBP'000
--------------------------------- ---------- ---------
Non-current assets
Goodwill 59,486 66,157
Intangible assets 23,458 28,493
Property, plant and equipment 473 297
Right of use assets 1,438 1,293
Other investments 2,188 -
Deferred tax assets 159 47
---------------------------------- ---------- ---------
Total non-current assets 87,202 96,287
---------------------------------- ---------- ---------
Current assets
Trade and other receivables 17,812 16,924
Contract assets 2,999 3,840
Corporate tax asset 335 -
Cash and cash equivalents 6,772 7,914
Total current assets 27,918 28,678
Assets held for sale - 708
---------------------------------- ---------- ---------
Total assets 115,120 125,673
---------------------------------- ---------- ---------
Current liabilities
Trade and other payables (8,943) (7,718)
Contract liabilities (3,608) (4,536)
Other taxes and social
security costs (4,073) (4,160)
Corporate tax liability - (1,214)
Deferred and contingent
consideration (225) (3,173)
Lease liabilities (564) (416)
Borrowings - (20)
Total current liabilities (17,413) (21,237)
---------------------------------- ---------- ---------
Liabilities directly associated
with assets held for sale - (103)
---------------------------------- ---------- ---------
Non-current liabilities
Deferred tax liabilities (5,796) (6,696)
Deferred and contingent
consideration - (198)
Borrowings (24,317) (18,000)
Lease liabilities (909) (878)
---------------------------------- ---------- ---------
Total non-current liabilities (31,022) (25,772)
Total liabilities (48,435) (47,112)
---------------------------------- ---------- ---------
Net assets 66,685 78,561
---------------------------------- ---------- ---------
Equity
Share capital 919 874
Own shares (983) (356)
Share premium 6,538 6,449
Merger reserve 85,621 78,705
Capital redemption reserve 15 15
Foreign exchange reserve (72) (92)
Retained earnings(1) (25,353) (7,034)
---------------------------------- ---------- ---------
Total equity 66,685 78,561
---------------------------------- ---------- ---------
(1) Prior year figures have been re-presented to include the
share option reserve as part of retained earnings.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Capital
Share Share Merger redemption Own Foreign Retained
capital premium reserve reserve shares exchange earnings Total
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April
2022 874 6,449 78,705 15 (356) (92) (7,034) 78,561
Loss for the
year - - - - - - (17,558) (17,558)
Exchange
differences
on translation
of foreign
operations - - - - - 20 - 20
Transactions
with owners
Shares issued 45 89 6,916 - (90) - - 6,960
Share
utilisations - - - - 11 - (11) -
Dividends paid - - - - - - (815) (815)
Share-based
payments - - - - - - 65 65
Own shares
purchased
by EBT - - - - (548) - - (548)
At 31 March
2023 (Unaudited) 919 6,538 85,621 15 (983) (72) (25,353) 66,685
For the year ended 31 March 2022
Capital
Share Share Merger redemption Own Foreign Retained
capital premium reserve reserve shares exchange earnings(1) Total
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April
2021 804 5,691 60,926 5 - 134 (6,906) 60,654
Profit for
the
year - - - - - - 97 97
Exchange
differences
on
translation
of foreign
operations - - - - - (226) - (226)
Transactions
with owners
Shares issued 80 257 17,779 - (257) - - 17,859
Share
cancellation (10) - - 10 - - - -
Dividends
paid - - - - - - (603) (603)
Other
adjustment - - - - - - (49) (49)
Share-based
payments - - - - - - 427 427
Share options
exercised - 501 - - - - - 501
Own shares
purchased
by EBT - - - - (99) - - (99)
At 31 March
2022
(Audited) 874 6,449 78,705 15 (356) (92) (7,034) 78,561
(1) Prior year figures have been re-presented to include the
share option reserve as part of retained earnings.
Consolidated Statement of Cash Flows
For the year ended 31 March 2023
Unaudited Audited
2023 2022
GBP'000 GBP'000
Cash flows from operating
activities:
(Loss)/profit before taxation
from total operations (18,971) 1,764
Adjustments for:
Depreciation 706 584
Amortisation of intangible
assets 6,347 5,347
Impairment of intangible 1,770 -
assets
Impairment of goodwill 9,995 -
Share-based payments 65 427
Foreign exchange gains (1) (292)
Finance expense 1,105 683
Loss/(gain) from fair value
movement in contingent consideration 188 (152)
Loss on disposal of property,
plant and equipment 6 4
Gain on sale of discontinued (1,606) -
operations
Working capital adjustments:
Decrease/(increase) in trade
and other receivables 1,271 (3,754)
(Decrease)/increase in trade
and other payables (1,141) 3,488
Net cash (used in)/generated
from operations (266) 8,099
Tax paid (1,522) (921)
Net operating cash (used
in)/generated from continuing
operating activities (1,788) 7,178
Net cash used in discontinued
operating activities(1) - (563)
----------------------------------------- ---------- ----------
Net operating cash flows
from total operations (1,788) 6,615
----------------------------------------- ---------- ----------
Cash flows from investing
activities:
Net cash paid on acquisition
of subsidiaries (1,969) (6,840)
Disposal of subsidiaries (127) -
Deferred consideration payment - (467)
Purchase of property, plant
and equipment (340) (249)
Additions to intangibles (244) (292)
Proceeds from sale of property,
plant and equipment - 6
Net cash used in investing
activities from continuing
operations (2,680) (7,842)
Net cash used in investing
in discontinued operations(1) - (165)
----------------------------------------- ---------- ----------
Net cash used in investing
activities for total operations (2,680) (8,007)
----------------------------------------- ---------- ----------
Cash flows from financing
activities:
New borrowings 6,300 5,000
Proceeds from exercise of
share options - 501
Purchase of own shares (548) (99)
Payment of lease liabilities (445) (362)
Interest paid (1,146) (683)
Dividends paid (815) (603)
----------------------------------------- ---------- ----------
Net cash generated from
financing activities 3,346 3,754
----------------------------------------- ---------- ----------
Net (decrease)/increase
in cash and cash equivalents (1,122) 2,362
Cash and cash equivalents
at beginning of the period 7,948 5,734
Effect of exchange rate fluctuations
on cash held (54) (148)
----------------------------------------- ---------- ----------
Cash and cash equivalents
including cash from discontinued
operations 6,772 7,948
Cash from discontinued operations - (34)
----------------------------------------- ---------- ----------
Cash and cash equivalents
at end of the year 6,772 7,914
Comprising:
Cash at bank and in hand 6,717 7,864
Cash held by trust 55 50
----------------------------------------- ---------- ----------
Cash and cash equivalents
at end of the year 6,772 7,914
----------------------------------------- ---------- ----------
(1) The cash flows of discontinued operations are immaterial to
the Consolidated Statement of Cash Flows for the year ended 31
March 2023 and so have not been presented separately for the
current financial year.
Notes to the Consolidated Financial Statements
1. General information
TPXimpact Holdings plc is a public limited company incorporated
in England and Wales under the Companies Act 2006 with registered
number 10533096. The Company's shares are publicly traded on AIM,
part of the London Stock Exchange.
The address of the registered office is 7 Savoy Court, London,
England, WC2R 0EX. The principal activity of the Group is the
provision of digitally native technology services to clients within
the commercial, government and non-government organisation (NGO)
sectors.
The financial information set out in this announcement does not
comprise the Group's statutory accounts as defined in section 434
of the Companies Act 2006 for the year ended 31 March 2023. The
statutory accounts for the year ended 31 March 2023 have not yet
been delivered to the Registrar of Companies, nor have the auditors
yet reported on them. This preliminary announcement does not
constitute statutory accounts under section 435 of the Companies
Act 2006.
2. Basis of preparation
The unaudited consolidated preliminary financial statements have
been prepared in accordance with applicable International Financial
Reporting Standards (IFRS) in conformity with the Companies Act
2006 and the AIM rules for Companies.
The financial statements are presented in pound sterling (GBP),
which is the functional currency of the parent company.
Going concern
The Company secured a waiver of its lending covenants from its
bankers at 31 March 2023 and agreed a further waiver at 30 June
2023. Amended covenants (based on minimum liquidity and Adjusted
EBITDA levels) will apply until the quarter ending 30 September
2024, at which time the original leverage metrics will be
reinstated (Net debt to Adjusted EBITDA of 2.5x and Adjusted EBITDA
to interest cover at 4.0x)
After reviewing the budgets and cash projections for the next
twelve months and beyond, the Directors believe that the Company
has adequate resources to continue operations for the foreseeable
future and to meet the requirements of its debt covenants. For this
reason they continue to adopt the going concern basis in preparing
the financial statements.
3. Accounting policies
The accounting policies used in the preparation of the unaudited
preliminary consolidated financial statements for the year ended 31
March 2023 are in accordance with the recognition and measurement
criteria of IFRS and are consistent with those which were adopted
in the annual statutory financial statements for the year ended 31
March 2022.
The Group disposed of its subsidiary Greenshoot Labs Limited
('GSL') on 24 May 2022 to OpenDialog AI Limited (ODAL).
Consideration of GBP2.2 million was received through the allotment
and issue of ordinary shares by ODAL and is presented as an "Other
investment" on the Group's consolidated statement of financial
position. The operations of GSL is presented as discontinued
operations with the comparatives and related notes restated
accordingly. The disposal generated a gain of GBP1.6 million
included in the profit after tax on discontinued operations in the
year ended 31 March 2023.
4. Business combinations
On 6 April 2022, the Group acquired the entire issued share
capital of Swirrl IT Limited ("Swirrl"), a software and services
business.
On 7 April 2022, the Group acquired the entire issued share
capital of Peak Indicators Limited ("Peak"), a visionary data
science and analytics consultancy offering services such as
analytics, data engineering and data science.
5. Borrowings
In July 2022 HSBC extended their revolving credit facility with
the Group to GBP30 million with a GBP15 million accordion. The new
facility is a sustainability-linked revolving credit facility that
incorporates targets which align with the Group's long-term ESG
objectives.
6. Earnings per share
2023 2022
Number of Number of
shares shares
'000 '000
------------------------------------------- ------------ ------------
Weighted average number of shares
for calculating basic earnings
per share 90,185 86,211
Weighted average number of dilutive
shares 3,839 1,768
------------------------------------------- ------------ ------------
Weighted average number of shares
for calculating diluted earnings
per share 94,024 87,979
------------------------------------------- ------------ ------------
2023 2022
GBP'000 GBP'000
------------------------------------------- ------------ ------------
(Loss)/profit after tax from continuing
operations (19,003) 820
Profit/(loss) after tax from discontinued
operations 1,445 (723)
------------------------------------------- ------------ ------------
(Loss)/profit after tax from total
operations (17,558) 97
------------------------------------------- ------------ ------------
Adjusted profit after tax from
continuing operations(1) 644 9,951
------------------------------------------- ------------ ------------
Earnings per share is calculated
as follows: 2023 2022
Basic earnings per share
Basic earnings per share from continuing
operations (21.1p) 1.0p
Basic earnings per share from discontinued
operations 1.6p (0.8p)
--------------------------------------------- -------- ---------
Basic earnings per share from total
operations (19.5p) 0.2p
--------------------------------------------- -------- ---------
Adjusted basic earnings per share
from continuing operations 0.7p 11.5p
--------------------------------------------- -------- ---------
Diluted earnings per share
Diluted earnings per share from
continuing operations(2) (21.1p) 0.9p
Diluted earnings per share from
discontinued operations(2) 1.6p (0.8p)
--------------------------------------------- -------- ---------
Diluted earnings per share from
total operations(2) (19.5p) 0.1p
--------------------------------------------- -------- ---------
Adjusted diluted earnings per share
from continuing operations 0.7p 11.3p
--------------------------------------------- -------- ---------
(1) Adjusted profit after tax on continuing operations is defined in note 7.
(2) In the year ended 31 March 2023, the weighted average shares
used in the basic EPS calculation has also been used for reported
diluted EPS due to the anti-dilutive effect of the weighted average
shares calculated for the reported diluted EPS calculation.
7. Alternative performance measures (unaudited)
In measuring our performance, the financial measures that we use
include those which have been derived from our reported results in
order to eliminate factors which distort period-on-period
comparisons. These are considered non-GAAP financial measures, and
include measures such as like-for-like revenue, adjusted EBITDA and
net debt. We believe this information, along with comparable GAAP
measurements, is useful to shareholders and analysts in providing a
basis for measuring our financial performance.
Reconciliation of net debt (excluding lease liabilities):
2023 2022
GBP'000 GBP'000
---------------------------- ---------- ----------
Cash and cash equivalents 6,772 7,914
Borrowings due within
one year - (20)
Borrowings due after
one year (24,317) (18,000)
---------------------------- ---------- ----------
Net debt (17,545) (10,106)
---------------------------- ---------- ----------
Reconciliation of operating (loss)/profit to adjusted
EBITDA:
2023 2022
GBP'000 GBP'000
----------------------------------------- ---------- ----------
Operating (loss)/profit (19,365) 3,209
Amortisation of intangible assets 6,347 5,347
Depreciation 706 584
Loss/(gain) from fair value movement
in contingent consideration 188 (152)
Impairment of intangible assets 1,770 -
Impairment of goodwill 9,995 -
Share-based payments 65 427
Costs directly attributable to business
combinations 229 1,013
Costs related to business restructuring 2,541 1,769
------------------------------------------ ---------- ----------
Adjusted EBITDA 2,476 12,197
------------------------------------------ ---------- ----------
Reconciliation of (loss)/profit before tax to adjusted profit
after tax:
2023 2022
GBP'000 GBP'000
--------------------------------------- --------- ---------
(Loss)/profit before tax
on continuing operations (20,470) 2,526
Amortisation of intangible
assets 6,347 5,347
Loss/(gain) from fair value
movement in contingent consideration 188 (152)
Impairment of intangible
assets 1,770 -
Impairment of goodwill 9,995 -
Share-based payments 65 427
Costs directly attributable
to business combinations 229 1,013
Costs related to business
restructuring 2,541 1,769
---------------------------------------- --------- ---------
Adjusted profit before tax
on continuing operations 665 10,930
Tax (excluding impact of
amortisation of intangible
assets) (21) (979)
---------------------------------------- --------- ---------
Adjusted profit after tax
on continuing operations 644 9,951
---------------------------------------- --------- ---------
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END
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July 06, 2023 02:00 ET (06:00 GMT)
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