26 January 2023

Idox plc

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

FY22 Results

"A solid performance, with strong recurring revenue and margin expansion"

 

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 2022.

 

Financial highlights

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

Revenue

·      Revenue increased by 6% to £66.2m (2021: £62.2m), driven by growth in Public Sector Software.

·      Recurring revenue¹ increased by 12% to £40.5m (2021: £36.3m), and now account for 61% of the Group's total revenue (2021: 58%).

Profit

·      Adjusted² EBITDA increased by 15% to £22.5m (2021: £19.5m).

·      Adjusted² EBITDA margin improved to 34% (2021: 31%), driven by operational improvements, acquisitions, and business mix.

·      Statutory operating profit increased by 13% to £8.7m (2021: £7.6m).

·      Statutory operating profit margin improved to 13% (2021: 12%).

·      Statutory profit before tax £6.6m (2021: £7.3m).

·      Adjusted³ diluted EPS increased by 7% to 2.44p (2021: 2.27p).

·      Statutory diluted EPS decreased to 1.24p (2020: 1.34p).

Cash and debt

·      Net debt⁴ at 31 October 2022 reduced by 18% to £6.7m (2021: £8.1m).

·      Free cashflow⁵ generation of £7.2m (2021: £9.7m).

·      Acquisition of LandHawk in the year for £1.1m.

Dividend

·      Final dividend of 0.5p per share (2021: 0.4p) declared, reflecting continuing growth opportunities, our strong financial position and our confidence in the future.

 

 

Operational highlights

Idox has delivered a resilient performance in a year of economic uncertainty and maintained good progress against the Group's strategic goals:

·      Record full year order intake up 19% on FY21 to £74m, with good wins across the Group, providing good visibility into FY23.

·      Good growth of revenue and profit in Public Sector Software (PSS) buoyed by FY21 acquisitions; stable performance in Engineering Information Management (EIM) despite difficult market conditions.

·      Contract wins and extensions which increase average tenure across both our PSS and EIM businesses.

·      Further enhancement of the Group's geographic information system mapping (GIS) capabilities with the acquisition of LandHawk, following on from the three FY21 acquisitions of Aligned Assets, thinkWhere and exeGesIS.

·      Continued upscaling of the Pune, India, centre of excellence to increase capacity, efficiency, capability, and knowledge sharing.

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

 

Current trading and outlook

·      The Group has enjoyed an encouraging start to FY23, with trading in line with the Board's expectations.

·      High levels of recurring revenue, contract renewals, orderbook and pipeline, providing good visibility which leaves us well placed in our aim to grow the business by double digits in FY23.

·      We continue to target further acquisitions to leverage our platform.

 

 

David Meaden, Chief Executive of Idox said:

 

"We have continued to make strong progress in line with both expectations and our strategic plan, despite a high inflationary environment and a period of political uncertainty across the markets in which we operate.

 

By refocusing Idox as a software business, we have been largely insulated from the broader issues affecting the economy and by adopting market leadership positions in a small number of clearly defined areas, we have also been able to substantially improve the overall quality of our proposition. Over the past 12 months we have significantly increased our recurring revenue and sales order intake, providing greater visibility of future revenues. Looking forward, we are well placed to continue our organic growth.

 

With a strong balance sheet, we will look to add further capabilities and capacity through our selective and accretive acquisition strategy. We believe that by leveraging the scale of our sales and marketing, software development and overall operations we can improve the performance of acquired businesses and add real value to our clients. The level of activity has been high in the year, and we anticipate we will reap the benefit of this hard work moving forward.

 

We have started the new financial year encouragingly, with trading in line with our expectations, and we are confident about the outlook for the year as a whole."

 

There will be a webcast at 9:30am UK time today for analysts and investors. To register for the webcast please contact MHP Communications at idox@mhpgroup.com

 

For further information please contact:

 

Idox plc	+44 (0) 870 333 7101
Chris Stone, Non-Executive Chairman	investorrelations@idoxgroup.com
David Meaden, Chief Executive
Anoop Kang, Chief Financial Officer
Peel Hunt LLP (NOMAD and Broker)	+44 (0) 20 7418 8900
Paul Gillam
Michael Burke
James Smith
MHP Communications	+ 44 (0) 20 3128 8170
Reg Hoare	idox@mhpgroup.com
Ollie Hoare
Matthew Taylor

 

About Idox plc

For more information see www.idoxplc.com @Idoxgroup

 

 

 

Alternative Performance Measures

The Group uses these APMs, which are not defined or specified under International Financial Reporting Standards, as this is in line with the 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.

¹Recurring revenue is defined as revenues recognised from support and maintenance fees, managed service fees (including for hosting) and Software-as-a-Service subscription fees.

²Adjusted 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.

³Adjusted EPS excludes amortisation on acquired intangibles, restructuring, financing, impairment, share option and acquisition costs.

⁴Net debt is defined as the aggregation of cash, bank borrowings and long-term bond.

⁵Free cashflow is defined as net cashflow from operating activities after taxation less capital expenditure and lease payments.

 

 

Annual financial report announcement

 

The extracts below are from the Annual Financial Report 2022. Note references refer to notes included in this Annual Financial Report Announcement 2022.

 

 

Chair's statement

 

Introduction

I am pleased to report a good set of results to all of our shareholders and other stakeholders for the financial year ending 31 October 2022. The business has maintained its trajectory of improving revenue, profit and net debt that has been established over the past few years. This year we have seen the benefits of our focused acquisitions contribution to the strong base that the business has established, and it is pleasing to note the solid growth in our levels of recurring revenue that are being delivered through our continued focus on long-term repeatable revenues.

 

During the year, there was a role change on our Board of Directors, as we appointed Anoop Kang to the position of Chief Financial Officer in place of Rob Grubb. We were delighted to welcome Anoop, who brings a good and complementary set of experiences to both the Board and the management team. We are fortunate that Rob sought to be part of the ongoing success of the business and is heading up our acquisition programme, as M&A Director, which we see as an important part of future value creation for the business. He has also been able to help Anoop get off to a fast start with understanding the business and has mitigated the risk associated with such an important leadership change.

 

As I reported last year, in 2021 we made a number of significant strategic changes through our disposal and acquisition programmes. The programme has continued, with the acquisition of LandHawk Software Services Limited, a land mapping and GIS data business, which fits very well with our core local authority and property business. FY22 has seen a significant focus on the integration of the acquisitions of Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd. These integrations have gone very well, with a complete transfer of our new colleagues onto Idox terms and conditions, and integration with the core operating systems and processes that have been established over the past four years.

 

One of the clearest demonstrations of our successful acquisition programme is seen in the significant growth in customers and revenues for our Idox Cloud offering, based on the cloud platform that came with the acquisition of Tascomi in 2019. Their annual recurring revenues are up 16% in FY22, and the Group was able to secure 15 new Idox Cloud Customers.

 

We had set ourselves a target of generating over 35% Adjusted EBITDA margin sustained over the medium term by investing in improving our core back-office systems and processes. I am pleased to say that we are well on track to achieving that target with a Group Adjusted EBITDA margin of 34% this year. This is a good performance from a mature, well managed business.

 

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.

 

Whilst the Covid-19 pandemic is now behind us, the longer lasting effects in changes to working patterns remains. We strive to make sure that we have the right blend of home and office work, and essential and non-essential travel. 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 impressed by the continuing positive attitudes and behaviours of all our colleagues at Idox, which has enabled this ongoing strong performance. We will continue to work to ensure that we maintain the right blend of work experience that meets our colleagues needs whilst also ensuring the continuous development of our skills and capabilities.

 

Building a strong and thriving culture enables us to build value for all our stakeholders. Each day we see our people living our DRIVE values by being dynamic, owning our commitments, doing the right thing, valuing those around them and being passionate about quality. It is with these values in mind that we continue to develop talent within the business creating an environment where growth and innovation is the ambition we work towards collectively.

 

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. The identification of acquisition opportunities and the integration of completed acquisitions is a key part of management focus and effort.

 

Board

There has been one change to the Board in FY22, as reported above. As in the previous 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.

 

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 completed the integration of three new companies, Aligned Assets, thinkWhere and exeGesIS, by hiving their trade and assets in to Idox Software Limited. This process is underway for our latest acquisition, LandHawk. All of these businesses are enhancing our core public sector software offering.

 

Dividends

The Board has proposed a final dividend of 0.5p (2021: 0.4p) for FY22, bringing the total for the year to 0.5p (2021: 0.4p). Subject to approval at the AGM, the final dividend will be paid on 14 April 2023 to shareholders on the register as at 31 March 2023. This decision was reached after a full consideration of the continuing growth opportunities before the business, our strong financial position and our confidence in the future.

 

Summary and outlook

The financial results of the last year reflect the increasing 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 FY22. The changes that we have made in the last few years, to the team, our structure, systems, and processes have delivered a step-change improvement in our financial performance. We can now point to an improved stability in performance and confidence for the future, based on strongly improving orderbooks and levels of recurring revenue. I am delighted 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 stakeholders are fortunate that such a talented group of people, including our recently joined colleagues from our acquisition programme, 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

 

Strong progress

We have continued to make strong progress in line with our strategic plan, despite a backdrop of high inflation and a period of political uncertainty.

 

By refocussing Idox as a software business, we have been largely insulated from the broader issues affecting the wider economy. Our market leading positions in our chosen markets means we have also been able to substantially improve the overall quality of our business. This clear focus has delivered improved margins and cash generated by operations, lower debt, and a stronger balance sheet.

 

We aim to be a 'rule of 40' business, where the combination of growth rate plus EBITDA equates to forty per cent. Through the adoption of our 4 Pillars (Revenue, Margins, Simplification, Communication), we have continued to improve our business and automate our processes. These continuous marginal improvements to our customer engagement and operating models have allowed us to improve EBITDA margins materially in the year from 31% to 34%.

 

Growth

Looking forward, we are well placed to continue to grow organically. Over the past 12 months we have significantly increased our recurring revenue and sales order intake, providing greater visibility of future revenues.

 

The local authority sector continues to be robust, and client retention across our core markets remains very high. We continue to be a partner to each of our local authority customers, helping them achieve better efficiencies, and we drive forward innovations that improve the quality and frequency of their engagement with citizens.

 

Whilst Public Sector markets have pressure on their budgets, there is a clear need to improve the way services are delivered to an increasing and complex system of stakeholders. This is especially true in land and property where we are focusing more of our ongoing investment on products that connect the wider eco-system of local authorities, planners, private developers, land agents, construction companies, estate agents, conveyancers and others who need to access the same consistent data and processes. We believe there are opportunities to improve the way the broader system operates and communicates to the benefit of all parties, in particular there also remains a significant opportunity to broaden our product offering with existing public sector clients.

 

This move to embrace digitisation requires greater accuracy of data and in particular geo spatial data, which is an area where we have improved our capabilities with the acquisitions of thinkWhere, LandHawk, Aligned Assets and exeGesIS over the last 24 months.

 

With the well documented skills shortages, clients are finding it challenging to retain and develop key skills, particularly in IT and data. As a trusted partner, Idox can often fill these gaps, with additional software solutions, hosting options or professional services.

 

Scaling the business

With our strong balance sheet, we will look to follow the success to date of adding further capabilities and capacity through a selective and accretive acquisition strategy. We believe that by leveraging the scale of our sales and marketing, software development and overall operations we can improve the performance of acquired businesses and add real value to our clients. The level of activity has been high in the year, and we anticipate we will reap the benefit of this hard work moving forward.

 

We have good headroom in our facilities to fund further M&A opportunities, with a £35m revolving credit facility and £10m accordion. We continue to pursue a number of acquisition opportunities but remain focused on ensuring strategic alignment whilst maintaining a disciplined approach to valuation.

 

Operations

We continue to optimise our operations across the Group. In our development team, following an internal recruitment process, we are pleased to have appointed Rick Hassard to the new role of Director of Engineering, and continued to grow our presence in Pune, India.

 

Shortly after the end of the financial year, we implemented a new divisional structure that will allow us to delegate more authority to those closest to our markets, products, and customers and to seek out ways to deliver more value as part of our 'Fly' stage. Scott Goodwin, Chris Evans, and Steve Bruce now head up the Land and Property, Communities and Assets operations respectively.

 

People

Growth requires that we have flexibility in our organisational model and that we have talent that can rise to the opportunities presented. Over the last two years we have put approximately 100 people through the Idox Leadership Programme, Leading Together, and we are pleased that the recent set of senior appointments in the business have all been graduates of that programme.

 

While we work on maintaining and growing a positive culture, we continue to review and track our rewards and benefits to ensure that our colleagues are fairly compensated.

 

We continue to focus heavily on employee engagement, and the importance of culture and values throughout our business. The Groupwide CEO broadcasts continue to be very well attended and we were delighted with the response from our teams to our 'Dare to be Different' survey, aimed at making Idox an inclusive workplace allowing everyone to be their best selves.

 

Outlook

We have made an encouraging start to FY23, and we continue to trade in line with the Board's 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. We are well placed in our aim to grow organically by double digits, given our increase in sales order intake and recurring revenue, providing greater visibility of future revenues.

 

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. We remain confident about the outlook for the year as a whole

 

David Meaden

Chief Executive Officer

 

 

Chief Operating Officer's review

 

Overview

I am pleased to provide an operational update and to report successful progress across the year at Idox. We continue to evolve our operational structures to deliver better services, more effectively, whilst maintaining our performance levels and high standards.

 

Across the Group, colleagues have shown great resilience and determination in the delivery of critical software and national infrastructure solutions into our growing customer base.

 

We are successfully operating in a hybrid working model, with colleagues working from both office locations and home where roles allow. This continued flexibility provides colleagues with a balanced approach and works well with our customer requirements which continue, on the whole, to necessitate remote working, with only limited onsite presence requested. 

 

Across the Group, our Four Pillars continue to drive our operating model at both a tactical deployment and strategic level. This approach embodies a clear methodology and culture for all colleagues when making key decisions within the business.

 

Revenue

To provide a more targeted focus on the markets that we serve, and to ensure our solutions help our customers deliver better services, for FY23 we have implemented a divisional structure that consolidates Business Units delivering comparable technical solutions or serving similar markets: Land and Property, Communities and Assets.

 

The Divisional structure has been designed to create a direct focus for sales, products, and customer engagement. Aimed at delivering great customer outcomes and aligning product roadmaps and innovation investment more dynamically to their respective market requirements, these changes will help drive high quality, long-term sustainable revenue growth across the Group. Our operating model continues to leverage the overall scale of the Group across horizontal functions including, Software Development, Professional Services, Customer Support and Infrastructure.

 

We retain strong business controls and governance to ensure that revenue is of high quality, and we continue to adopt and implement solutions that help improve our annually recurring revenues and long-term value.

 

Focussing on long-term sustainable growth has helped deliver a growth rate of over 12% for Annual Recurring Revenues across the Group.

 

We continue to invest in our sales stratification strategy, improving efficiencies, reducing our overall cost of sales and enhancing the customer experience. This year we welcomed 190 new customers to Idox and saw our order intake grow to over £74m (+19% YoY) which was significantly ahead of our revenues in-year, building momentum into future revenues and orderbook.

 

We continue to lead the way in the provision of digital SaaS platforms for the Built Environment and Public Protection, Public Sector market through our Idox Cloud solutions, winning 15 new customers to the platform. New customers included North Warwickshire Borough Council and Rother District Council. Our cloud conversion strategy saw continued successes this year with more customers committing to long-term agreements with Idox, including both Shropshire County Council and London Borough of Brent moving to the Idox Cloud solution. We also saw significant successes in the Local Authority customer base particularly in the provision of private cloud services; successes included Aberdeenshire Council, North Lanarkshire Council, Sunderland City Council and Newport City Council.

 

In Aligned Assets we continued to win new business throughout 2022, providing an address management service to the largest police force in the country, the Metropolitan Police. Our solution delivers critical information and property intelligence directly to investigating officers. This is a solution that is fundamental to the emergency dispatch of officers for the whole of Greater London and the Royal estates, so accuracy, speed and resilience are vital components of the solution.

 

In Social Care we saw new wins with Oldham Council, Isle of Wight and Cambridgeshire County Council. In our Sexual Health Solutions, we saw an important win with Solution4Health and long-term commitments from Virgin Care Services, Central London Community Health NHS Trust and Berkshire Healthcare NHS Foundation Trust.

 

In Elections we saw new clients for both Elections Management Software and PVMS (Print & Managed Services), these included Oxford City Council, Somerset Council, and Scottish Borders Council. Our Databases business continued to attract additional customers, where we secured over 120 new customers to our GrantFinder and ResearchConnect SaaS solutions.

 

In our EIM division we welcomed 15 new customers across a number of different industries, this included a five-year contract for Lummus Technology LLC, TransAlta Energy Corporation and Adani-Ambuja Cements Ltd. We also saw continued commitment and large projects from existing customers including Canadian Natural Resource Limited (CNRL), Oxy Inc, and PSEG.

 

Margins

We have seen an overall improvement in Adjusted EBITDA to 34% (2021: 31%) in our continuing business performance over the last 12-months. We recorded a statutory profit before tax of £6.6m (2021: £7.3m) representing a statutory profit margin of 10% (2021: 12%).

 

Across the Group we continue to invest in our people, technology and operational initiatives to help drive improvements in margin performance. Leading Together and other development programmes have created many opportunities for colleagues from within the business to take on new roles and promotions.

 

We have doubled the size of our India operation in Pune and extended our capabilities to include all aspects of our back-office functions, including Finance and HR. We have also expanded our development capacity and included technical consultancy and services resources; this continues to be a key strategic development area for Idox.

 

Our operational structure combines the focus of a targeted divisional go-to-market team focussed on product innovation, revenue and customer growth with the scale of the entire Group for Engineering, Professional Services, Customer Support and other back-office functions, this combination maximises our cost base and resources.

 

Simplification

We continue with our efforts to operate the Group as a simple and efficient business, leveraging the scale of the organisation with continued Group wide operational functions for Professional Services, Engineering, Customer Helpdesk/Support functions as well as IT, People services and Finance.

 

A divisional structure provides the leadership required to directly drive revenue growth and strategic product alignment through bringing the appropriate market knowledge and domain expertise.

 

We continue to invest in technology, process improvement and organisational design across the Group which includes the implementation of Financial Force as a Professional Services Automation (PSA) tool bringing greater project and financial controls, better deployment of resources, improved utilisation, and has allowed Idox to improve the overall Customer Experience.

 

As we look to maximise our investment in our CRM tools implemented over the previous years, we have included additional capabilities for forecasting and deployed pricing automation tools to the portfolio, improving consistency, efficiency and revenue visibility.

 

We have also implemented technology to assist Product Management and Engineering areas; helping to align strategic product objectives with our corporate objectives. These tools help us drive best practice and execute delivery across the organisation in a consistent and effective way. A key initiative of the investment is the provision of a dynamic communication gateway for customers; improving feedback, delivering release notes, providing articles for consultation and generating active product roadmaps are all features of the gateway. This improves the overall collaboration with our customers and is helping us drive our investments and development efforts into the areas that really matter for our customers.

 

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) accreditations as well as achieving certification for ISO 22301 (Business Continuity). I am also pleased to report that during the year, Idox was fully accredited with Cyber Essential Plus, demonstrating our ongoing commitment to cyber security and protection protocols).

 

Communication

This year we have continued to improve the way we work and communicate with our customers, leveraging technologies previously mentioned to help create more meaningful engagement and increasing touch points. Additionally, we have communicated directly through our extensive account management teams, these are further supported through our internal sales support and our project management office.

 

We also work with specific areas of government and industry groups directly linked to the markets that we serve. This provides access and knowledge of the latest strategies, requirements and trends enabling Idox to participate in these discussions and take advantage of these opinions and points of view within development plans.

 

We operate a wide and varied communication strategy across all our teams and look to address issues and challenges identified with openness and transparency. We aim to reflect our own people's desire for Idox to be a socially responsible and sustainable business, providing colleagues with time and resources to support charities and local good causes. Our employee initiatives, such as Workplace Wellbeing, provide support to our colleagues and create communities where support and connection is created. We also look to encourage colleagues to initiate and drive engagement across the business through shared interest, these have included photography groups, pets, cycling, knitting and other hobbies and pastimes. We believe that these are all good signs of a healthy and vibrant business with actively engages colleagues where all opinions are aired and heard.

 

FY23 has started well and with our new divisional structure, focussing our efforts on specific market challenges and aligning our investments into key revenue opportunities, we are already seeing a positive impact.

 

Jonathan Legdon

Chief Operating Officer

 

 

Financial review

FY22 has seen a robust set of results against challenging market conditions. The Group delivered increased revenues and improved levels of EBITDA and margin along with improvements in its net debt position at 31 October 2022. In addition, the Group continued to progress its M&A strategy and completed the acquisition of LandHawk in October 2022.

 

The Idox Content businesses are classified as discontinued operations following their disposal in FY21. As a result of the disposal there have been no revenues or EBITDA attributable to this division in the year, however, there have been finalisation costs associated with the disposal of £0.6m.

 

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

 

		FY22	FY21	Variance
		£000	£000	£000	%
Revenue
- Public Sector Software		58,283	54,114	4,169	8%
- Engineering Information Management		7,901	8,071	(170)	(2%)
- Idox Software		66,184	62,185	3,999	6%
- Idox Content (discontinued)		-	3,897	(3,897)	(100%)
- Total		66,184	66,082	102	(0%)
Revenue split
- Public Sector Software		88%	82%
- Engineering Information Management		12%	12%
- Idox Software		100%	94%
- Idox Content (discontinued)		-	6%
Adjusted EBITDA*
- Public Sector Software		20,974	17,969	3,005	17%
- Engineering Information Management		1,535	1,550	(15)	(1%)
- Idox Software		22,509	19,519	2,990	15%
- Idox Content (discontinued)		-	276	(276)	(100%)
- Total		22,509	19,795	2,714	14%
Adjusted EBITDA margin split
- Public Sector Software		36%	33%
- Engineering Information Management		19%	19%
- Idox Software		34%	31%
- Idox Content (discontinued)		-	7%
- Total		34%	30%

 

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

 

Continuing operations - PSS and EIM

		FY22	FY21	Variance
		£000	£000	£000	%
Continuing revenues
- Recurring (PSS)		34,557	30,111	4,446	15%
- Recurring (EIM)		5,989	6,139	(150)	(2%)
- Total recurring		40,546	36,250	4,296	12%
- Non-recurring (PSS)		23,726	24,003	(277)	(1%)
- Non-recurring (EIM)		1,912	1,932	(20)	(1%)
- Total non-recurring		25,638	25,935	(297)	(1%)
- Total continuing revenue		66,184	62,185	3,999	6%
- Recurring*		61%	58%
- Non-recurring**		39%	42%

 

* 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.

 

Revenue from continuing operations for the Group increased 6% in the year to £66.2m (2021: £62.2m). PSS was up 8% for the year at £58.3m (2021: £54.1m) and EIM has remained broadly flat with revenue of £7.9m (2021: £8.1m). Taking account of revenues from discontinued businesses in 2021 of £3.9m total Group revenue is slightly up in the year.

 

Recurring revenues for the year increased 12% from £36.3m to £40.5m and represented 61% (2021: 58%) of the total continuing revenue. Within PSS, recurring revenue increased 15% to £34.6m (2021: £30.1m). Good growth in recurring revenue in the Group's Local Authority and Grants businesses was supported by new wins and a full year impact from Aligned Assets, exeGesIS, and thinkWhere. The recurring revenues in EIM remained stable at £6.0m (2021: £6.1m).

 

Non-recurring revenues for the year were marginally lower at £25.6m (2021: £25.9m). PSS recorded a small reduction of £0.3m resulting in revenue of £23.7m (2021: £24.0m) with strong contributions from the Local Authority and Elections businesses. EIM remained stable at £1.9m (2021: £1.9m).

 

Adjusted EBITDA increased by 15% to £22.5m (2021: £19.5m), delivering an improved Adjusted EBITDA margin of 34% (2021: 31%). The margin improvement has been driven by a combination of operational efficiencies, changes in mix and pricing.

 

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 Group divested of its Content division during March and April 2021 and therefore has not recorded any revenues in the year. The table below is included to provide the comparative figures for FY21.

 

		FY22	FY21	Variance
		£000	£000	£000	%
Idox Content revenues
- Recurring		-	604	(604)	(100%)
- Non-recurring		-	3,293	(3,293)	(100%)
		-	3,897	(3,897)	(100%)
- Recurring		-	15%
- Non-recurring		-	85%

 

Profit before taxation

The statutory profit before tax was £6.6m (2021: £7.3m). 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.

 

		FY22	FY21	Variance
		£000	£000	£000	%
Adjusted EBITDA		22,509	19,519	2,990	15%
Depreciation		(1,597)	(1,581)	(16)	1%
Amortisation - software licences and R&D		(5,317)	(5,062)	(255)	5%
Amortisation - acquired intangibles		(3,670)	(3,561)	(109)	3%
Restructuring costs		(470)	90	(560)	(622%)
Acquisition costs		(183)	134	(317)	(237%)
Financing costs		(30)	(110)	80	(73%)
Share option costs		(2,584)	(1,789)	(795)	44%
Net finance costs		(2,056)	(372)	(1,684)	453%
Profit before taxation		6,602	7,268	(666)	(9%)

 

Restructuring costs were £0.5m (2021: £0.1m gain). The restructuring costs in the year are associated with further simplifications of the Group structure as we look to remove historical dormant companies associated with previous acquisitions.

 

Acquisition costs of £0.2m (2021: £0.1m gain) relates to the acquisition of LandHawk in the year and finalisation fees associated with the acquisition of Aligned Assets, thinkWhere and exeGesIS in the prior year. The prior year is in relation to the acquisition of Aligned Assets, thinkWhere and exeGesIS.

 

Financing costs of £30k (2021: £0.1m) relate to the annual fee incurred as part of the loan facility agreement. The prior year costs were incurred as part of the loan extension and transition to SONIA from LIBOR in October 2021.

 

Share option costs of £2.6m (2021: £1.8m) relate to the accounting charge for awards made under the Group's Long-term Incentive Plan. The increase in the year is driven by the full year impact of awards made in the prior year coupled with additional awards made in FY22.

 

Net finance costs have increased to £2.1m (2021: £0.4m) due the impact of a £1.0m adverse foreign exchange movement (non-cash) on the Euro denominated bond and a £0.7m adverse impact of an effective interest rate accounting adjustment on drawn loan balances (also non-cash).

 

The Group continues to invest in developing innovative technology solutions across the Idox Software portfolio and has capitalised development costs of £6.6m (2021: £4.6m). The increase in the year is primarily due to the full year impact of the FY21 acquisitions (£1.5m), with the remaining £0.5m being driven by an increase in our development and other outsourced costs.

 

Taxation

The effective tax rate (ETR) for the year was 16.4% (2021: 9.4%) for total operations. The ETR for the year for continuing operations was 16.4% (2021: 17.0%).

 

The main factors for the reduction in the volatility in the ETR on the profit before tax position were the disposals in FY21 which resulted in income not subject to tax, meaning permanent and other differences giving rise to ETR effects were proportionately lower in the current period. These differences included routine non-allowable amounts, losses utilised in the period in addition to international losses not recognised in the period and higher overseas tax rates.

 

The difference between the statutory rate of 19% and the ETR of 16.42% is due to tax losses utilised in the year, the impact of overseas tax rates and international losses arising in the period and not recognised.

 

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 £13m, split across Malta (£10.9m) and France (£2.1m). 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 decreased to 1.14p (2021: 2.71p) as a result of the profit for FY21 benefitting from the £6.29m gain on disposal of the Content businesses. Diluted earnings per share decreased to 1.11p (2021: 2.65p).

 

Adjusted basic earnings per share for continuing operations increased 6% to 2.48p (2021: 2.33p) and adjusted diluted earnings per share increased 7% to 2.44p (2021: 2.27p). The difference between the increase in adjusted EBITDA of 15% and the adjusted basic earnings per share of 8% is driven by the increase in finance costs in the year.

 

The Board proposes a final dividend of 0.5p per share (2021: 0.4p), which represents a total dividend for the year of 0.5p per share (2021: 0.4p), at a total cost of £2.3m (2021: £1.8m).

 

Balance sheet and cash flows

The Group's net assets have increased to £67.4m compared to £60.8m as at 31 October 2021. 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 2022 £000
Total Equity as per FY21 Financial Report	60,810
Share option movements	2,542
Fair value of deferred consideration shares on purchase of subsidiary	376
Equity dividends paid	(1,784)
Profit for the year	5,044
Exchange gains on translation of foreign operations	428
Total Equity as per FY22 Financial Report	67,416

 

  

 

The increase in the Group's net assets is principally due to the profit for the year, with an 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 LandHawk in the year, which was offset by the reduction in the right-of-use-assets. The Group settled VAT deferrals from the previous year of £1.0m and the historic provision associated with our exited London office.

 

Cash generated from operating activities before tax as a percentage of Adjusted EBITDA was 81% (2021: 84%). 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 FY20 which were fully settled in FY22. The Group generally continues to have high levels of adjusted EBITDA to cash conversion.

 

Free cashflow for the year was £7.2m (2021: £9.7m). Free cashflow has decreased in the year due to the VAT effect referred to above coupled with an increased investment in capex in the year.

 

		FY22	FY21
		£000	£000
Net cashflow from operating activities after taxation		15,647	16,554
Capex		(7,558)	(5,747)
Lease payments		(927)	(1,154)
Free cashflow		7,162	9,653

 

The Group ended the year with net debt of £6.7m (2021: £8.1m), an 18% improvement on the 2021 net debt position. Net debt comprised cash of £13.9m less bank borrowings of £9.2m and the Maltese listed bond of £11.3m, which is due in June 2025. We ended the year with a net debt to Adjusted EBITDA ratio of 0.3 (2021: 0.42).

 

The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. The Group's total available facilities at 31 October 2022 consisted of a revolving credit facility of £35m and £10m accordion which continue to June 2024.

 

Anoop Kang

Chief Financial Officer