27 January 2022

Idox plc

('Idox' or the 'Group' or the 'Company')

FY21 Results

"Another year of strong financial performance and strategic and operational progress"

 

Idox plc (AIM: IDOX), a leading supplier of specialist information management software and solutions to the public and asset intensive sectors, is pleased to report its financial results for the year ended 31 October 2021.

 

Financial highlights

Reconciliations between adjusted and statutory earnings are contained at the end of this announcement.

Continuing operations (excluding disposed Idox Content businesses¹):

Revenue

·      Revenue increased by 9% to £62.2m (2020: £57.3m), including 5% organic increase.

·      Recurring revenue² increased by 2% to £36.3m (2020: £35.7m).

Profit

·      Adjusted³ EBITDA increased by 13% to £19.5m (2020: £17.2m).

·      Adjusted³ EBITDA margin improved to 31% (2020: 30%).

·      Operating profit increased by 90% to £7.6m (2020: £4.0m). Operating profit margin improved to 12% (2020: 7%).

·      Adjusted⁴ diluted EPS increased by 54% to 2.27p (2020: 1.47p).

·      Diluted EPS increased to 1.34p (2020: 0.11p).

Cash and debt

·      Free cashflow⁵ of £7.1m (2020: £11.2m) following planned repayment of 2020 VAT deferrals.

·      Disposal of Content businesses generated net proceeds of £10.7m; 3 acquisitions completed in the year with initial net consideration of £10.5m.

·      Net debt⁶ at 31 October 2021 reduced by 50% to £8.1m (2020: £16.1m).

Dividend

·      Final dividend of 0.4p per share (2020: 0.3p) declared, reflecting the strong cash generation and healthy financial position of the Group.

 

 

Operational highlights

Idox has maintained good progress against the Group's strategic goals whilst delivering successful operational execution:

·      Material advancement in our M&A strategy to focus capital on core software businesses with high margin operations and good growth potential:

o  Disposal of Content businesses, in line with our continued simplification and focus on software operations.

o  Acquisition of Aligned Assets, thinkWhere and exeGesIS, which enhance our Public Sector offering and provide greater focus and depth of expertise in the GIS (geospatial information services) market.

o  Further development of our M&A ambitions in both sourcing and managing pipeline opportunities.

·      Improvements to our product and go-to-market efforts; now fully managed and reported in our new Group-wide CRM platform.

·      Consolidated all offshore activity to a single Idox centre in Pune, India.

·      Clear focus on innovation and consolidation of our product portfolio, including continuing our journey to cloud across our portfolio.

·      Further investment in our people promoting higher levels of engagement, and leadership.

·      Increasing our commitments to Environmental, Social and Governance initiatives; conducting business responsibly is core to our business model and long-term strategic goals.

 

Current trading and outlook

·      FY22 has started well, in line with expectations.

·      Combination of recurring revenue and order book, driven by H2 sales orders, and resilient public sector markets, provides good visibility for FY22 revenue.

·      The sales pipeline for FY22 remains encouraging.

·      FY21 acquisitions integrating well and to plan, and good line of sight over an attractive M&A pipeline.

 

 

David Meaden, Chief Executive of Idox said:

 

"We are pleased to report another year of strong financial performance, and strategic and operational progress.

 

After exiting our non-core Content businesses in March 2021, we acquired three excellent Public Sector software businesses, improved our balance sheet strength, and extended our financing facilities for a further 18 months, to June 2024, on improved terms.

 

We have invested in our people, improved our engagement with customers and focused our product efforts in response to the increasing pace of the move to digitisation and cloud. We continue to improve our supporting infrastructure and processes to ensure efficient and effective execution, and to support our ambitions to continue to grow both organically and inorganically.

 

The outlook for the business remains strong and we are well positioned in our 'fly' stage of growth to continue to create good value for our people, customers and shareholders."

 

There will be a webcast at 10:00am UK time today for analysts and investors. To register for the webcast please contact MHP Communications on  idox@mhpc.com

 

For further information please contact:

 

Idox plc	+44 (0) 870 333 7101
Chris Stone, Non-Executive Chairman
David Meaden, Chief Executive
Rob Grubb, Chief Financial Officer
Peel Hunt LLP (NOMAD and Broker)	+44 (0) 20 7418 8900
Edward Knight
Paul Gillam
James Smith
MHP Communications	+ 44 (0) 203 128 8170
Reg Hoare	idox@mhpc.com
James Bavister
Harry Clarke

 

About Idox plc

For more information see www.idoxplc.com @Idoxgroup 

 

 

 

Alternative Performance Measures

These items are excluded from statutory measures of profit to present a measure of cash earnings from underlying activities on an ongoing basis. This is in line with management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers.

There have been no adjustments to any of our reporting metrics for any impact of the Covid-19 pandemic.

¹ The comparatives have been restated due to the Content business being reclassified as discontinued operations. There has been no change to the overall results.

² Recurring revenue is defined as revenues recognised from support and maintenance fees, managed service fees (including for hosting) and Software-as-a-Service subscription fees.

³ Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. Share option costs are excluded from Adjusted EBITDA as this is a standard measure in the industry and how management and our shareholders track performance.

⁴ Adjusted EPS excludes amortisation on acquired intangibles, restructuring, financing, impairment, share option and acquisition costs.

⁵ Free cashflow is defined as net cashflow excluding: acquisitions / disposals, debt repayments & drawdowns, and shareholder placing & dividends.

⁶ Net debt is defined as the aggregation of cash, bank borrowings and long-term bond.

 

 

Annual financial report announcement

 

The extracts below are from the Annual Financial Report 2021. Note references refer to notes included in this Annual Financial Report Announcement 2021.

 

 

Chairman's statement

 

Introduction

I am pleased to be able to report an excellent set of results to all of our shareholders and other stakeholders for this financial year. Since the appointment of David Meaden as CEO the business has been thoroughly transformed and we are now seeing the continuing and sustained benefits of this transformation in the results that Idox is delivering. It is rewarding to be able to report on another year of growth in revenues, profits and most importantly, cash, and a return to paying a dividend. In business, no success story can be taken for granted, but this transformation is notable and sets the business up well for future success.

 

The past three years have seen a lot of change to our Board of Directors and senior management team, but fortunately we had managed to make most of these changes before having to deal with the impact of the Covid-19 pandemic. Consequently, the business has been managed consistently and steadily through a difficult phase, and the stability that comes from a settled management team has allowed us to make a couple of quite important strategic changes in our portfolio.

 

During the year we disposed of two non-core businesses: our compliance business, based in Germany and Belgium; and our grants consultancy business, based in the Netherlands. Both are good businesses in their own right but did not enjoy a particularly strong strategic fit with our core software businesses. I would like to thank the management and the staff of both businesses for their very professional behaviour during the disposal processes and we wish them and their new shareholders the very best of luck in taking the businesses forward.

 

The cash generated from these disposals, together with the cash that we are now generating from our own operations, has given us the firepower to make a number of acquisitions that demonstrate a stronger strategic fit with our core business. During the year we made 3 acquisitions; Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd. All of these businesses bring exciting new capabilities that fit very well with our core business, and we are pleased to welcome our new colleagues and look forward to working with them to deliver value to both existing and new customers from the combination of products and services that we can now offer.

 

The investments that we have made over the past few years in improving our core back-office systems and processes have allowed us to set a target of generating over 30% margin from our mature operations. I am pleased to say that we have achieved that target in several areas of our business, with potentially a bit more improvement to come as we further refine our processes.

 

In early 2021, we received an unsolicited approach for the Group. Our strategy was to reject offers until the proposed offer price was at a point where the Board felt that, if this were to be confirmed, it was at a level that shareholders would want to consider. Ultimately, the proposed offer did not materialise, and I am pleased to note that the inevitable workload associated with such an approach did not distract our colleagues from the focus required to deliver the excellent results described above.

 

As we move into the new financial year, we can expect to see continued growth in our core businesses enhanced by the acquisitions we have already made. We will also continue to target further acquisitions to allow us to continue to leverage the platform that we have created through our operational investments.

 

The Covid-19 pandemic has affected everyone and Idox is no exception. As I mentioned in my last report, we have been fortunate that demand for our products and services did not drop during the Covid-19 pandemic, and the excellent attitudes displayed by our colleagues in figuring out practical and effective ways of working with the many new restrictions meant that Idox did not suffer financially through this period. However, we have all adopted new ways of working, new attitudes towards essential and non-essential travel, and blended home and office work. Employers need to work hard and creatively to enable appropriate new ways of working that meet all these new requirements without allowing a drop in the most important thing, excellent customer service. I have been very impressed by the continuing positive attitudes and behaviours of all our colleagues.

 

Group Strategy

The Group continued its focus on providing digital solutions and services to the public sector in the United Kingdom, complemented by our Engineering Information Management (EIM) business servicing customers across the world. The key to our success is to ensure we deliver better user results and productivity improvements for customers through focusing on usability, functionality and application of integrated digital and increasingly cloud-based technologies and solutions. As mentioned above, we were able to accelerate the development of this strategy through the disposal of businesses that did not fit this model, and the integration of further acquisitions where we identify businesses that can accelerate our progress. We expect to continue to make such accretive acquisitions in the coming year.

 

Board

There have been no changes to the Board in FY21 following a number of changes in the prior year. We carried out a formal Board Effectiveness review during the year, and there were some good points raised which we will be incorporating in the coming year.

 

The Board of Directors has one female Director. I am satisfied that there is sufficient diversity in the Board structure to bring a balance of skills, experience, independence, and knowledge to the Group, however, I intend to keep this balance under review and continued assessment.

 

Corporate governance

We are cognisant of the important responsibilities we have in respect of Corporate Governance and shaping our culture to be consistent with our objectives, strategy, and business model which we set out in our Strategic Report and our description of Principal Risks and Uncertainties. The Group is committed to conducting its business fairly, impartially, in an ethical and proper manner, and in full compliance with all laws and regulations. In conducting our business, integrity is the foundation of all Company relationships, including those with customers, suppliers, communities, and employees.

 

 

 

 

Corporate simplification

As highlighted above, during the financial year we disposed of our non-core Content businesses and reinvested in the acquisition of three new companies, Aligned Assets, thinkWhere and exeGesIS, which will enhance our core public sector software offering.

 

The trade and assets of Idox Health Limited was hived into Idox Software Limited, in line with our corporate simplification strategy. We also completed the consolidation of our Maltese entities during the year, hiving five entities in to one.

 

Dividends

The Board has proposed a final dividend of 0.4p to be paid (2020: 0.3p) for FY21, bringing the total for the year to 0.4p (2020: 0.3p). Subject to approval at the AGM, the final dividend will be paid on 8 April 2022 to shareholders on the register at 25 March 2022. This decision was reached after a full consideration of the pace of recovery in our business, our strong financial position and our confidence in the future.

 

Summary and outlook

The financial results of the last year reflect the quality of the Idox business. We operate in good markets, with strong market positions and insights, and we have every confidence that we can continue the excellent progress we have seen in FY21. The changes that we have made in the last couple of years, to the team, our structure, systems, and processes have delivered a step-change improvement in our financial performance. I am pleased to have had the opportunity to work with all my Idox colleagues during a period of such tremendous improvement and I look forward to continuing that work in delivering growing value to all our stakeholders.

 

Idox shareholders are fortunate that such a talented group of people, comprising our entire workforce, have chosen Idox as a place they want to work. Their expertise and diligence have continued to deliver the support and value that our customers expect, and I am pleased to extend my thanks to all of them.

 

Chris Stone

Chairman

 

 

Chief Executive's review

 

Overview

I am pleased to report another successful year at Idox, where our teams across the Group have worked with great determination and fortitude through the ongoing and obvious impacts caused by the Covid-19 pandemic. We have adapted to the challenges of working from home and more latterly, hybrid models for collaboration and teamworking. I am tremendously proud of the way all my colleagues have come together and made the required adjustments in their day-to-day activities to deliver for customers and to drive the business forward.

 

Idox has become synonymous with our strategy defined by 4 Pillars and 3 Phases. The 4 Pillars of Revenue, Margin, Simplification and Communication have become engrained in our operations and provide the foundations upon which we have delivered the Walk and Run phases of our journey.

 

The improved strategic focus of the business, coupled with thorough operational management of the business, has produced improved financial results and the subsequent reduction in net debt has provided the basis for strategic progress as we move into the Fly phase of our journey. 

 

The continued focus on producing software to manage complex business process, legislative and regulatory environments is the essence of our business model. This focus and clarity about what we do and where we add substantive value for customers informed our decision to sell the Content division, through two transactions to separate private equity organisations. It has also provided us with clarity in the delivery of our ongoing acquisition strategy, where we have identified new capabilities that enhance our existing offerings and work to increase the target addressable markets available to us.

 

We were delighted to complete the acquisitions of Aligned Assets, thinkWhere and exeGesIS during the year and each of these businesses offer complementary software and data capabilities to the Group. The addition of these address management and GIS capabilities allows us to provide extended service engagements into specific areas of the private sector that are also connected to the built environment and plantech markets we have long served, offering exciting opportunities for future growth and product development for our Group.

 

Today Idox is well placed in its markets, where we improve professional and expert processes and support clients in their transition to becoming modern, agile organisations operating digitally and through the Cloud. We are leaders in software for the built environment, modern transportation networks, digitisation, elections and facilities management. We empower those that need extra support in special educational needs and disability and our software also manages the sexual health of the nation. Furthermore, with the addition of Aligned Assets, exeGesIS and ThinkWhere we can improve client data quality and improve the accuracy, accessibility and presentation of their address and geo-spatial information.

 

Our markets

We continue to see some impact on our markets of the Covid-19 pandemic, although retention rates for existing customers remains high as our systems are typically central to the processes they support.

 

We have seen a slowdown in some new business activity compared to pre-Covid-19 pandemic levels, particularly in our Health and Social Care businesses as client resources have been diverted to directly support response to the Covid-19 pandemic, and in EIM where a slowdown in consumer and industrial consumption generally in FY20 and the first half of FY21 has impacted the engineering projects our software supports. Conversely, we have seen high demand for our services across our portfolio, as our clients look to us as a trusted partner to maintain, maximise and extend existing deployed solutions.

 

We continue to be active in our chosen markets, bringing thought leadership and regular market engagement to identify current and future problems in our client-base and adjusting our product development plans accordingly. In addition, we are acquiring well-respected product businesses that enhance and extend our offerings to our customers and end markets.

 

Managing our business

Across our organisation we focus on our Four Pillars of Revenue, Margin, Simplification and Communication. This approach provides cohesion for the whole Group. The Four Pillars are well-articulated across the organisation and embedded into our onboarding process for people joining the organisation. This focus ensures that everyone in the Group can make a meaningful contribution to our overall success and has provided the basis on which the organisation has discovered and articulated its values.

 

Revenue

We have established strong business controls such that we do not pursue revenue for the sake of growth, but that we focus on products with the certainty of delivering lasting value to customers. We make sure that we fully understand the financial and operational implications for each piece of business that we contract. This results in improving the amount of recurring revenue in the business, providing a strong foundation for future growth in both revenues and margins.

 

During the year we improved revenues on a continuing basis by 8.6% to £62.2m including our acquisitions (5.5% excluding acquisitions).

 

Sales Orders

During the year we established a centralised Revenue Assurance unit and completed the integration of the sales operations to include the EIM sales group. We closed over 4,000 orders to a total contract value of £61.6m and welcomed over 150 new customers to Idox.

 

We continued to deliver modern, digital SaaS platforms for built environment and public protection customers through Idox Cloud applications and FY21 saw significant new wins at Coventry City Council, Warrington Borough Council, Birmingham City Council and the Government of Bermuda. In addition, we saw continued success with our conversion to the cloud strategy with wins including Leicester City Council, Royal Borough of Chelsea & Westminster and the City of Cardiff Council along with the provisioning of private cloud services to our Uniform customer base, including The City of Edinburgh Council. We also saw some early success from our acquisitions, with Aligned Assets winning important contracts with the national gas and electricity supplier switching project to provide address matching services, and with the Metropolitan Police to provide Risk Intelligence services for the whole of Greater London.

 

In our Health & Social Care businesses we recorded wins including Medway NHS Foundation Trust for the tracking of their day forward packs; and North Somerset Council, who became the latest user of our Education, Health and Care Hub as part of an overall 24-month programme to significantly improve special educational needs and disabilities service provisions within the Council.

 

In Elections we were successful with Bracknell Forest Council implementing the Idox Election Management System, deployed through a Microsoft Azure environment, managing the council's full breadth of electoral services and, replacing their long-term incumbent solution.

 

In Computer Aided Facilities Management (CAFM) we recorded a number of wins, such as BCAS Bio Medical Services to manage maintenance of hospital devices following a highly successful trial, along with BET365 and DHL to manage facilities within their own organisations. In Databases we secured 96 new GrantFinder Customers and 21 new ResearchConnect Customers. In Transport we continued to closely support the ongoing Toronto Metrolinx project which is due to go live in the coming financial year, and secured long-term commitments from both Cornwall and Somerset for their development solutions.

 

After a slower start to the year in the EIM Division, FusionLive, our Engineering Document Management solution, secured 11 new customer wins in H2. This included a 5-year agreement with EBLA, which involved the capture of 10.5m project documents and drawings for the existing Doha International Airport as well as the current expansion to scale up for the 2022 Football World Cup. Over 1,000 documents per day are uploaded into the system from engaged engineering contractors. Other new customers included Rosetti Marino and Audubon Engineering, who will be using FusionLive across all group projects within their portfolios.    

 

Margins

During a year of obvious Covid-19 pandemic challenges, we have seen increased demand for services from our clients. Accordingly, we have seen an improvement in our effectiveness in delivering professional services to customers and this has helped to drive further improvement in margins across our operations. 

 

We have seen an improvement in Adjusted EBITDA margins to 31% (2020: 30%) in our continuing business over the past twelve months. We recorded a statutory profit before tax for continuing operations of £7.3m (2020: £1.8m), representing a statutory profit before tax margin of 12% (2020: 3%). With our desire and ambition to be a 'Rule of 40' business, we feel that further improvements in sales of existing offerings to our current clients and entry into new near adjacent markets with our newly acquired capabilities position us well for future margin growth.

 

We take pride across our teams in delivering effectively to customers and this in turn ensures that we enjoy strong cash generation for our activities. At the end of the financial year, we had a net debt position of £8.1m. We have seen net cash generation and a reduction in debt over the last three financial years of £23.7m (a 75% reduction).

 

Across the Group we have continued to drive initiatives that we believe will deliver improved margins. This included a fundamental review of our approach to data migration and in particular data mapping, with tooling developed to remove the need for our customers to map data items. This will reduce lead times, improve quality and enhance new customer experience in the critical early days of working with Idox. Also of note, our sexual health product reached a significant milestone with the release of our SaaS self-service platform, which we believe is the first to be fully NHS digital, data and technology standards compliant; and we successfully transitioned our education, health and care ('EHC') customers to the Idox Cloud SaaS platform.

 

Simplification

We continue in our efforts to maintain the Group as a well-run, simple and efficient organisation. Following the disposals of our Content division, Idox is now a single business providing software-based solutions to the Public Sector and Engineering markets.

 

During the period we have continued to streamline our operations with the consolidation of all UK activities into our main UK trading company, Idox Software Limited. The trade of Aligned Assets and thinkWhere transferred to Idox Software Limited on 1 November 2021 and exeGesIS will be similarly transferred in early FY22. This consolidation allows us to maintain single customer, people and tax structures which provides clarity, simplicity, and superior service to all involved.

 

We continue with ongoing development of our CRM installed in the prior year, and to improve the integration and utility of our ERP. We have expanded the use of CRM by embedding our key sales approval processes, installing a new configure, price and quoting process to improve the processing of customer orders, and established new reporting to understand progress in sales pipeline management and reporting of revenues. In our ERP, we have undergone a programme of industrialising a number of processes, allowing their measurement in real-time. These investments in our processes and systems help bring clarity and efficiencies through lower processing times and better information and provide a strong base for our ongoing and planned future growth.

 

We have maintained our commitment to high quality processes by renewing our ISO 9001 (Quality Management), ISO 14001 (Environmental Management), ISO 45001 (Occupational Health & Safety) and ISO 27001 (Information Security Management) as well as achieving certification for ISO 22301 (Business Continuity).

 

Communication

This year we have continued to improve the way we work and communicate with our customers through our direct account management teams, internal sales support and our project management office. In addition, we have developed the "Idox, Do More" proposition to help deliver a consistent brand and message; this includes a number of thought leadership positions that explore in detail the challenges our clients face and how people, process and technology solutions combine to improve service, efficiency and public engagement.

 

We have continued to engage openly with all our teams and to address issues and challenges identified with gusto. We host regular CEO broadcasts along with forums and workshops to work through any issues raised that require business attention or improvement. Increasingly, these activities are initiated and driven by teams formed across the business that have a shared interest rather than initiated from a top-down approach. This is a good sign of a healthy and vibrant business. We also aim to reflect our own people's desire for Idox to be a socially responsible and sustainable business. 

 

As we described in prior reports, we have embraced more flexibility in our working patterns across the Group and have listened carefully to our teams about what works for them and is practical. We do not intend to mandate a return to offices, and we will continue to work flexibly. We have offered continuing support to our teams to ensure good mental health is maintained and our Idox Wellbeing team, which is drawn from across the business, provides mental health support to the Group and we are all grateful for their continued commitment to this activity. 

 

The Idox leadership development programme that ran in 2021 has proven very successful. As we move into 2022, we have a further 70 individuals committing to a year-long programme of self-development. We are grateful to the 33 people that committed to the programme in 2021, for exemplifying our DRIVE values and for their ongoing contribution to the success of the Group.

 

Responsible Idox and ESG

We recognise the importance of our responsibilities in respect to ESG. In FY21 we formed an ESG steering committee, with the responsibility of understanding and monitoring how our business practices are sustainable in environmental and social terms, as well as being well governed.  This year we publish our ESG plans in detail within this financial report, and I am proud that these are an authentic representation of our progress and ambition in this area.

 

Outlook 

FY22 has started well and we continue to trade in line with expectations. We will continue to invest selectively to grow our capabilities and support our customers. The business has a strong foundation in property and asset-based solutions and this, along with our focus on digital transformation and Cloud provision, will underpin our future strategy and growth.

 

A successful business rests upon the quality of its teams and the desire and ability to go that extra step for customers, colleagues, and shareholders. Over the past three years we have invested in our people and have sought to create an environment that develops talent and is welcoming to new team members. We believe this lays the foundation for our future success and this combined with our investments in governance, processes and infrastructure will support our future progression as a successful business. We continue to have financial resources at our disposal for accretive and enhancing acquisitions and, having shown that this can be delivered successfully, we look forward to driving shareholder value moving forward and becoming a 'rule of 40' business.

 

David Meaden

Chief Executive Officer

 

 

Financial review

The financial year ended 31 October 2021 has seen a lot of change, consistent with our continued corporate simplification and focus on our core public sector software markets. The Content businesses were disposed of in March and April 21 for net proceeds of £10.7m, whilst the proceeds from the disposal were reinvested in the acquisition of Aligned Assets, thinkWhere and exeGesIS, for initial net consideration of £10.5m. A strong focus on sales and commercial governance has enabled us to pursue only earnings-enhancing revenues. This approach has resulted in improving revenue, Adjusted EBITDA and improved cash generation, for continuing operations, compared to prior periods.

 

Idox Content is classified as discontinued operations given the disposal of its businesses during the year. In addition, corporate costs previously allocated to Idox Content in FY20 have been reduced by £1,348,000 to better reflect the actual reduction in corporate costs as a result of the discontinued operations.

 

The following table sets out the revenues and Adjusted EBITDA for each of the Group's segments from its continuing and discontinued activities:

 

		FY21	FY20	Variance
		£000	£000	£000	%
Revenue
- Public Sector Software		54,114	48,426	5,688	12%
- Engineering Information Management		8,071	8,858	(787)	(9%)
- Idox Software		62,185	57,284	4,901	9%
- Idox Content (discontinued)		3,897	10,733	(6,836)	(64%)
- Total		66,082	68,017	(1,935)	(3%)
Revenue split
- Public Sector Software		82%	71%
- Engineering Information Management		12%	13%
- Idox Software		94%	84%
- Idox Content (discontinued)		6%	16%
Adjusted EBITDA*
- Public Sector Software		17,969	15,536	2,433	16%
- Engineering Information Management		1,550	1,702	(152)	(9%)
- Idox Software		19,519	17,238	2,281	13%
- Idox Content (discontinued)		276	2,346	(2,070)	(88%)
- Total		19,795	19,584	211	1%
Adjusted EBITDA margin split
- Public Sector Software		33%	32%
- Engineering Information Management		19%	19%
- Idox Software		31%	30%
- Idox Content (discontinued)		7%	22%
- Total		30%	29%

 

* Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs.

 

Continuing operations - PSS and EIM

The PSS and EIM divisions, accounting for 94% of Group revenues (2020: 84%), delivered revenues of £62.2m (2020: £57.3m).

 

		FY21	FY20	Variance
		£000	£000	£000	%
Continuing revenues
- Recurring (PSS)		30,111	28,863	1,248	4%
- Recurring (EIM)		6,139	6,886	(747)	(11%)
- Non-recurring (PSS)		24,003	19,563	4,440	23%
- Non-recurring (EIM)		1,932	1,972	(40)	(2%)
		62,185	57,284	4,901	9%
- Recurring*		58%	62%
- Non-recurring**		42%	38%

 

* Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed Service arrangements which involve a fixed fee irrespective of consumption. 

** Non-Recurring revenue is defined as revenues without any formal commitment from the customer to recur on an annual basis.

 

Recurring revenues have increased in PSS due to the acquisitions made in the second half of the year which have delivered recurring revenues of £1.1m. The recurring revenues in EIM have decreased in the year due to some contracts coming to their end and not being renewed. The proportion of recurring revenues has decreased slightly due to non-recurring revenues growth slightly outpacing our recurring revenues.

 

Non-recurring revenues have increased also due to the impact of the continued high levels of sales governance implemented over the last 2 years, resulting in higher recoveries.

 

Adjusted EBITDA increased by 13% to £19.5m (2020: £17.2m), delivering an improved EBITDA margin of 31% (2020: 30%). The margin improvement has been driven by the increased revenues converting strongly to margin and has been boosted by the high margin acquisitions of Aligned Assets and exeGesIS that were made in the year.

 

We continue with our efforts to improve efficiencies through marginal gains across our sales, development, professional services and support activities, and leverage our common resources to drive higher margins through improved economies of scale.

 

Discontinued operations - Content

The Content division recorded a revenue reduction of 64% to £3.9m (2020: £10.7m) and a decrease in Adjusted EBITDA of 88% to £0.3m (2020: £2.3m) as a result of the businesses being disposed of in March and April 2021.

 

		FY21	FY20	Variance
		£000	£000	£000	%
Idox Content revenues
- Recurring		604	1,626	(1,022)	(63%)
- Non-recurring		3,293	9,107	(5,814)	(64%)
		3,897	10,733	(6,836)	(64%)
- Recurring		15%	15%
- Non-recurring		85%	85%

 

Profit before tax for continuing operations

The reported profit before tax was £7.3m (2020: £1.8m). The reasons for the improved adjusted EBITDA are set out above, and the reasons for the movements in all other constituent parts of profit before tax are set out below. The following table provides a reconciliation between adjusted EBITDA and statutory profit before taxation for continuing operations.

 

		FY21	FY20	Variance
		£000	£000	£000	%
Adjusted EBITDA		19,519	17,238	2,281	13%
Depreciation and Amortisation		(10,204)	(10,063)	(141)	1%
Restructuring costs		90	(1,748)	1,838	(105%)
Acquisition costs		134	(125)	259	(207%)
Financing costs		(110)	(306)	196	(64%)
Share option costs		(1,789)	(1,004)	(785)	78%
Net finance costs		(372)	(2,177)	1,805	(83%)
Profit before taxation		7,268	1,815	5,453	300%

 

Restructuring gains were £0.1m (2020: £1.7m costs). The restructuring of business units in the prior year has now largely been completed and as a result restructuring costs have been significantly reduced and represent a small gain in the current year. Restructuring costs are analysed as follows:

 

		FY21	FY20	Variance
		£000	£000	£000	%
Redundancies		(22)	(245)	(223)	(91%)
Disposal of subsidiaries		32	(397)	(429)	(108%)
Take over approach		(171)	-	171	n/a
Litigation		-	(34)	(34)	(100%)
Property		251	(1,072)	(1,323)	(123%)
Total restructuring costs		90	(1,748)	(1,846)	(106%)

 

Acquisition gains of £0.2m (2020: £0.1m costs) relates to the acquisition of Aligned Assets, thinkWhere and exeGesIS in the year. The prior year is in relation to the final settlements to the acquisition of Idox Cloud (formerly Tascomi) in August 2019.

 

There were no impairments in the year (2020: £Nil).

 

Financing costs of £0.1m (2020: £0.3m) relate to professional fees incurred as part of the loan extension and transition to SONIA from LIBOR in October 2021. The prior year costs were incurred as part of the refinancing in December 2019.

 

Share option costs of £1.8m (2020: £1.0m) relate to the accounting charge for awards made under the Group's Long-term Incentive Plan.

 

Net finance costs have decreased to £0.4m (2020: £2.2m) as a result of less interest being payable in respect of the Group's decreased banking facilities which were fully drawn in the second half of the prior year as part of our Covid-19 pandemic defensive actions. Additionally, the effective interest rate accounting adjustments have decreased as a result of the change in drawn loan balances.

 

The Group continues to invest in developing innovative technology solutions across the Idox Software portfolio and has incurred capitalised development costs of £4.6m (2020: £4.7m).

 

Taxation

The effective tax rate (ETR) for the year was 9.4% (2020: 52.8%) for total operations. The ETR for the year for continuing operations was 17.0% (2020: 73.7%).

 

The main factors for the reduction in the volatility in the ETR on the profit before tax position was the significant increase in the profit before tax as well as the disposals in the year which resulted in income not subject to tax meaning, permanent and other differences giving rise to ETR effects were proportionately lower. These differences included routine non-allowable amounts in addition to international losses not recognised in the period and higher overseas tax rates.

 

There are substantial carried-forward losses not recognised for deferred tax purposes to date, owing to adoption of a prudent loss recognition position. The gross value of these losses not recognised to date totals £10.8m, split across Malta (£8.5m), the UK (£0.6m), and France (£1.7m). The Board is hopeful that the Group will benefit from these unrecognised tax losses, with the exception of Malta, in the future and these will be recognised at the point where utilisation becomes more certain.

 

Earnings per share and dividends

Basic earnings per share for continuing and discontinued operations improved to 2.71p (2020: 0.29p) as a result of the Group reporting a significantly larger profit after tax compared to that in FY20. Diluted earnings per share improved to 2.65p (2020: 0.29p).

 

Adjusted earnings per share for continuing operations increased to 2.33p (2020: 1.50p) as a result of the Group reporting a significantly larger profit after tax compared to that in FY20, as well as reduced restructuring costs in the year. Adjusted diluted earnings per share increased to 2.27p (2020: 1.47p).

 

The Board proposes a final dividend of 0.4p per share (2020: 0.3p), which represents a total dividend for the year of 0.4p per share (2020: 0.3p), at a total cost of £1.8m (2020: £1.3m).

 

Balance sheet and cash flows

The Group's net assets have increased to £60.8m compared to £47.0m at 31 October 2020. The constituent movements are detailed in the Group's consolidated Statement of Changes in Equity: which are summarised as follows:

 

	12 months to 31 October 2021 £000
Total Equity as per FY20 Financial Report	46,958
Share option movements	2,081
Fair value of deferred consideration shares on purchase of subsidiary	1,261
Equity dividends paid	(1,331)
Profit for the year	11,949
Exchange gains on translation of foreign operations	(108)
Total Equity as per FY21 Financial Report	60,810

 

 

 

 

 

 

 

 

 

 

 

 

The increase in the Group's net assets is principally due to the profit for the year, with a significant improvement in net debt in the year as the Group continued to target cash generative revenues and margins across its business. This is bolstered by the increase of intangible assets due to the purchase of three acquisitions in the year, and partially offset by the increase in deferred consideration payable on these acquisitions. The Group has deferred VAT of £1.0m as at 31 October 2021 (2020: £3.9m), which it is anticipated will be repaid in the year ended 31 October 2022.

 

Cash generated from operating activities after tax as a percentage of Adjusted EBITDA was 85% (2020: 124%). This decrease was due primarily to the VAT liability deferrals the Group took advantage of as part of its early Covid-19 pandemic defensive actions in the prior year which will be settled across FY21 and FY22. The Group generally continues to have high levels of adjusted EBITDA to cash conversion.

 

The reported net cashflow was an outflow of £12.2m (2020: inflow of £23.7m) due in the main to net debt repayments during the year of £19.4m (2020: net debt drawdown £12.8m). Free cashflow at 31 October 2021 was £7.1m (2020: £11.2m). Free cashflow has decreased in the year due to the VAT effect referred to above.

 

		FY21	FY20
		£000	£000
Net cashflow		(12,068)	23,683
Add back:
Acquisitions / disposals		(139)	200
Debt repayments		35,000	25,762
Drawdowns		(15,600)	(38,575)
Net cost of staff share schemes / (Issue of shares)		(64)	118
Free cashflow		7,129	11,188

 

The Group ended the year with net debt of £8.1m (2020: £16.1m), a significant improvement on the previous year. Net debt comprised cash of £18.3m less bank borrowings of £15.4m and the Maltese listed bond of £11.0m.

 

In October 2021 the Group extended its facility with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc (the 'Lenders') for an additional 18 months, to June 2024. The Group also transitioned from LIBOR to SONIA at this point. The Group's total signed debt facilities at 31 October 2021 consisted of a revolving credit facility of £35m and £10m accordion.

 

The Group has carefully assessed the likely impact of the Covid-19 pandemic on the business and our customers. Idox is fundamentally resilient due to the Group's high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. We continue to monitor the situation and adapt our approach as required.

 

Rob Grubb

Chief Financial Officer