itim Group plc (LON:ITIM), a SaaS based technology company that enables store-based retailers to optimise their businesses to improve financial performance, has announced its audited results for the year ended 31 December 2022.
Financial Highlights
| · | Group revenues increased by 4% to £14 million (2021: £13.5 million) |
| · | Annual recurring revenue (“ARR”) is £13.2 million (2021: £11.1 million) |
| · | Group Adjusted EBITDA* £0.2 million (2021: £2.2 million) |
| · | Adjusted EBITDA* margin decreased by 19 percentage points (“PPT”) to 2% (2021: 17%) |
| · | Adjusted Earnings per share** -2.01 pence (2021: 3.75 pence) |
| · | Closing cash balances were £3.9 million at 31 December 2022, down from £6.2 million at 31 December 2021 |
| * | EBITDA has been adjusted to exclude share-based payment charges, exceptional items, along with depreciation, amortisation, interest and tax from the measure of profit |
| ** | The profit measure has been adjusted to exclude exceptional items and share option charge |
Copies of the Annual Report and Accounts for FY2022 with the notice of annual general meeting have been posted to shareholders today and are available on the Company’s website www.itim.com. The Company intends to hold its annual general meeting at 11am on 12th May 2023 at the offices of DMH Stallard LLP, 6 New Street Square, London EC4A 3BF.
CHAIRMAN’S STATEMENT
I am pleased to report that itim’s focus on product development, strengthening recurring revenues and diversifying its customer base has insulated it from significant impact in the difficult economic climate which prevailed in 2022 following Russia’s invasion of Ukraine early in the year. It is also a credit to the team that we achieved some important strategic milestones in the year to ensure we remained in line with customer requirements in the prevailing business environment.
I said in my report last year that itim entered 2022 in a solid financial position following the IPO fundraise and growing subscription revenues and client activity. A keynote is that we continued to invest significant sums in our R&D programme in 2022 alongside investing in our staff base.
Furthermore, we have identified exciting growth opportunities for 2023 including a relaunch of our consultancy business as a complement to our technology offering and to enable our customers to gain the maximum benefit from it.
We also see a great opportunity in launching a payment hub designed to meet the needs of our retailer customers with the potential to offer them considerable cost savings when compared to traditional bank offerings.
Overall, excellent progress was made.
Financial results
Revenues increased by 4% year on year increasing from £13.5m in 2021 to £14m in 2022. Importantly, annual recurring revenues (“ARR”) at the year-end increased significantly from £11.1m to £13.2m an increase of 19% with recurring revenues representing 84% of total revenues (2021: 77%). Gross margins fell however to 32% (2021: 41%) principally due to vital investment in headcount and ensuring the team remain committed and incentivised, but also due to the fact that many of our new customer contracts are subscription only with no up-front fees as previously with income consequently being delayed later into the cycle. This one-off impact should reverse out over time as subscription revenues kick in.
People
Itim’s business is built around its people and products and as mentioned we have invested heavily in both. The team’s commitment and passion to deliver first-rate services to our customers is evident and I continue to be immensely impressed with their high calibre and commitment. We review the effectiveness of the team and any areas where we could benefit from bringing in new expertise on an ongoing basis and I am pleased to report that a considerable number of new appointments were made during the year.
Outlook
We believe the need for itim’s products and services is greater than ever as it becomes paramount for our customers to maintain profitability by driving efficiencies throughout their businesses. With the investment we have made in team, technology and products we are well placed to deliver on these requirements. We believe these factors together with the new developments outlined above will maintain momentum during 2023 and I am optimistic that 2023 will see continued growth in revenues and profits.
The Board and I extend our thanks to our loyal team, our partners and customers for their support.
Michael Jackson
Chairman
13th April 2023
CHIEF EXECUTIVE’S REVIEW
I am pleased to report that the solid platform for growth that was laid in 2021 has indeed led to the growth in sales in 2022 in what can only be described as a difficult trading period. Revenues in the year increased by 4% over 2021 with booked recurring revenue for the year of £11.8m representing 84% of Group turnover.
Itim currently has close to 80 customers using all or some elements of our platform providing us with a stable, recurring revenue base. We also have a good mix of business in the UK and growing international revenues.
The challenges caused by inflationary pressures should result in our customers homing in on all possible [cost effective] efficiencies to improve or at least maintain performance. Itim’s business is designed precisely to meet such objectives and we therefore anticipate that although 2023 is likely to be a challenging year for retailers, itim’s business will nevertheless fare well in this climate.
Within our own business we focused on two objectives in 2022. First, we focused on improving our EBITDA margin as investor sentiment turned to cash conservation, and we have taken various steps in this regard. Second, we looked to ensure that sales growth is matched by cash generation. To these ends we have and will continue to reduce the incentives we have previously offered customers. We are also keenly aware that rapid sales growth has sometimes resulted in pressures on cash flows. We have therefore amended our business plan to seek out growth opportunities that satisfy these two objectives. Alongside these steps and in order to protect itim for the future, we have continued to invest in R&D, increasing spend in 2022 and invested in building and protecting our staff base.
Key business developments planned for 2023 are:
To relaunch our consultancy business with the objective of assisting customers maximise the benefits from deploying itim’s technology and enabling them to remain firmly focused on their own businesses. We firmly believe that many of our customers would welcome our expertise to help them maximise the benefits of our technology.
To launch an extension to our Retail Suite to allow us to provide Merchandising applications like line cards, and WSSI. Critical processes for retailers.
A second development planned for 2023 is to launch a payment hub which we have been funding over the past two years.
Itim provides an application called Didos which does invoice matching for about 30 major UK retailers. Invoice matching is how retailers approve supplier invoices. We have been approached by fintechs who want to collaborate with us in facilitating international payments to suppliers and also allowing retailers to offer invoice discounting services.
Itim provides EDI services and our ‘itim hub’ application to allow retailers and suppliers to digitally collaborate.
The payment hub is an extension of both those offerings. It is an application in the ‘itim hub’ that will allow us to collaborate with some of these fintech businesses.
In summary, our existing applications and new developments and consulting services will I believe ensure that itim is well placed to continue to win new customers and we see numerous opportunities within our existing customer base to increase our revenues.
Ali Athar
Chief Executive Officer
13th April 2023
CHIEF FINANCIAL OFFICER’S REVIEW
Income Statement
Overview
Our 2022 financial year was overshadowed by global events which drove double digit inflation which in turn fed into costs. The year post IPO was forecast as an investment year with additional headcount being taken on to deliver projects and improve quality. With headcount costs representing over 60% of our cost base and average pay increases of over 11% during the year management expected a detrimental impact on the full years result.
Revenue
With the uncertainty of global events and the impact on retailers of increasing cost of goods, wage pressure and spiralling transportation costs, we observed that retailer’s decision making timescales lengthened which we believe was due to them hunkering down to weather the uncertainties. This led to longer sales cycles for itim but also slowed project delivery timescales. However despite this, the Group still achieved an uplift on revenues during 2022 of 4.2% moving revenue to £14.0m from £13.5m in 2021 with Annual Recurring Revenue (ARR) increasing 19% to £13.2m at the year-end (2021: £11.1m). Additionally the quality and certainty of 2022 revenues improved with 84% of turnover coming from recurring revenues (2021: 77%).
Gross profit
2022 was the first full year in which the Group had secured new contracts that were subscription only with no upfront services fees. Where no services fees are being charged to the customer for implementation, the cost of implementation is being absorbed by the business. As a consequence, with no revenues in the year of implementation of a project – margins and EBITDA will be depressed in that year. Additionally with the gearing up of headcount ahead of projects and the inflationary impact on cost of sales it was inevitable that the gross margin of the group would drop in the year. This should improve over time when the subscriptions revenues commence. As a result the overall gross margin dropped to 32% in 2022 (2021: 41%) but should improve on the commencement of the subscription revenue of those contracts.
Administrative expenses
The 30% increase in administrative expenditure over the 2021 cost was caused by three main factors. Firstly inflationary increases on salaries, secondly pulling forward investment in sales and administrative hires that were scheduled for 2023 into 2022, and lastly the full year’s impact of being a listed business over the six monthly cost incurred in 2021.
Foreign exchange rates
With 35% of revenues denominated in foreign currencies, the table below sets out the percentage of annual contracts in the foreign currencies we trade in and the impacts of those foreign currencies at the Balance Sheet date and the average movements over the course of the year for P&L purpose.
Foreign exchange rates have remained volatile during the year with an overall weakening of Sterling against all our functional currencies throughout the year and at the year end. The most significant impact for itim has been the 16% depreciation of Sterling against the Brazilian Real between December 2021 and December 2022 as 18% of our contracts are denominated in Reals. The Sterling to Euro rate has experienced similar volatility with Sterling ending the year 5% weaker at 31st December 2022 when compared to 31st December 2021 with 9% of our contracts in Euro’s.
Despite phasing of movements over the current and prior year the weighted monthly average exchange rate of translating from functional currencies also remained volatile, with the Brazilian Real and US Dollar strengthening against Sterling by 14% and 10% respectively.
| FX Rates | 31-Dec-21 | 31-Dec-22 | 31-Dec-22 | 2021 Average | 2022 Average | 2022 |
| (% of ARR at year end) | FX rate | FX rate | Variance % | FX rate | FX rate | Variance % |
| £GBP/Euro (ARR 9%) | 1.191 | 1.129 | -5% | 1.163 | 1.150 | -1% |
| £GBP/BRL (ARR 18%) | 7.612 | 6.386 | -16% | 7.42 | 6.389 | -14% |
| £GBP/USD (ARR 8%) | 1.354 | 1.209 | -11% | 1.376 | 1.238 | -10% |
Financing costs
Total net interest costs in the year were nil (2021: £67k).
The reduction in interest payable on external loans was due to repayment of borrowing during the year ended 31st December 2021 leaving the business debt free.
Exceptional items
Exceptional costs incurred during the year were £nil (2021:
£0.7m). The comparative cost relates to the initial public offering and admission to AIM which could not be directly attributed to the raising of new equity and therefore were expensed through the P&L.
Taxation
The Group continues to take advantage of R&D tax credits as it continues to innovate its technology offering. The current year tax credit is made of up of a net current tax credit of
£0.62m (2021: £0.26m) and a deferred tax charge of £0.03m (2021: £0.2m).
Earnings/(Loss) per share
Basic EPS for the year was -2.2p (2021: 0.88p) and the diluted EPS was -2.2p (2021: 0.78p).
On an adjusted profit basis after adjusting for exceptional items and the share option charge the adjusted earnings basic EPS was -2.01p (2021: 3.75p) and the adjusted earnings diluted EPS was -2.01p (2021: 3.32p).
Dividend
The Board does not propose to pay a dividend in respect of the financial year (2021: £nil).
Group Statement of Financial position
The Group had net assets of £12m at 31st December 2022 (2021: £13m) a decrease of £1m attributable to the loss for the year.
Cash flow and working capital
The Group ended the year with a cash balance of £3.9m (2021: £6.2m).
Cash generated from operating activities for the year amounted to £0.5m (2021: £2.1m). There were no further inflows from investing activities during the year (2021: £7.7m).
Cash expended was on capitalised product development of £2.2m (2021: £1.4m) payment of debt, interest, lease liabilities and equipment of £0.5m (2021:£4.3m). Additionally a further loan of £0.1m was made to a fintech start up to explore the disintermediation of banks on retailer’s cost of bank payments. Which taken together with our opening cash balance of £6.2m gives the closing cash balance at the year- end.
IPO and admission to AIM
In June 2021 itim was admitted to AIM, a market of the London Stock Exchange after a successful initial public offering raising £8m (gross) to support its growth strategy as it continues to transition to a subscription-based revenue model.
Equity
There were no changes in equity during the year.
On the 28th June 2021 the Company issued 5,194,806 new 5p shares at 154p each raising £8m in new equity.
In May 2021 as part of the listing process, the Company purchased 110,251,743 deferred shares for 1p and subsequently cancelled that class of share whilst creating a capital redemption reserve of the same value.
Additionally, the Company undertook a capital reduction transferring £10,468,919 of share premium to retained earnings.
Ian Hayes
Chief Financial Officer, itim Group
13th April 2023
