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 unaudited interim results for the 6 months ended 30th June 2022.
|·||Group revenues of £6.8m (Half Year 2021 (“HY21”): £6.4m, Full Year 2021(“FY21”): £13.5m)|
|·||Booked Recurring Revenue £5.6m (HY21: £4.9m, FY21: £10.3m)|
|·||Recurring revenue percentage of Group revenue 82% (HY21: 77%, FY21: 77%)|
|·||Annual recurring revenue (“ARR”) £12.6m (HY21: £10.6m, FY21: £11.1m)|
|·||Annual growth in ARR is 19% (HY21: £10%, FY21: 16%)|
|·||Adjusted EBITDA1 £0.3m (HY21: £1.2m, FY21: £2.2m)|
|·||Adjusted EBITDA1 margin 5% (HY21: 19%, FY21: 17%)|
|·||(Loss)/profit before tax (£0.4)m (HY21: (£0.1)m, FY21: £0.2m)|
|·||Cash at £5.3m (HY21: £9.6m, FY21: £6.2m)|
|·||Earnings per share (1.20) pence, (HY21: (0.20) pence, FY21: 0.88 pence)|
|·||Adjusted Earnings per share2 (1.06) pence (HY21: 2.59 pence, FY21: 3.75 pence)|
Full year numbers quoted above are audited and half year numbers quoted above are unaudited.
1. EBITDA has been adjusted to exclude share-based payment charges, exceptional items, along with depreciation, amortisation, interest and tax from the measure of profit
2. The profit measure has been adjusted to exclude exceptional items and share option charge
Ali Athar, CEO of itim Group plc, said: “We have continued to invest significant sums in product development and ensuring that we have the resources to deliver a first rate service to our growing, high quality customer base. In these testing economic times, I see the deployment of itim’s products and services as being vital in helping clients weather the storm. I am optimistic that itim is well placed to respond to the challenges presented in the year ahead.”
I am pleased to report that the period ended 30 June 2022 was one of steady growth in sales and recurring revenues. Revenue for the 6 month period was £6.8m (HY21: £6.4m) an increase of 6%, of which recurring revenues were £5.6m (HY21: £4.9m) representing 82% of sales and underpinning future sales. Adjusted EBITDA (EBITDA excluding share-based payment charges and exceptional items) fell to £0.3m (HY21: £1.2m) mainly due to increases in headcount as we build capability ahead of new projects and increase staff resilience. Consequently, EBITDA margin fell in line with this investment to 5% (HY21: 19%). The results also reflect the increase in associated public company costs following our admission to AIM in June 2021. Cash balances totalled £5.3m at the period end (FY21: 6.2m) the change reflecting the significant investments we have made in asset purchases and product development needed to underpin future growth. Adjusted loss per share was 1.2p (HY21: loss 2.59p).
As we reported in previous statements, itim has steadily widened its product offering to its client base with the aim of creating deeper relationships. As the number and depth of our customer relationships grow, so does our knowledge and insight into the retail industry. We look to use this knowledge to further enhance our products and client service.
During the interim period under review our client base continued to grow and our proportion of revenues which are recurring will continue to increase.
Costs have increased significantly in the period to support growth. As noted in the highlights above, we have invested heavily in new headcount in the past 12 months, with 27 new staff appointed in the 12 month period from 1st July 2021 to 30th June 2022 of which 13 were added in the period under review. Additionally, pay rises were awarded to existing staff in line with inflation. The objective of this investment is to build the required capability ahead of potential new subscription sales and to increase staff capacity to cover busy periods. We have also invested circa £100k in new security software products for our hosting centre.
Public company costs also increased compared to the same period in 2021 due to the costs of being an AIM quoted company – these are mainly additional board costs and professional advisory fees.
The economic predictions for the next 12 months (and beyond) make for quite negative reading and we can expect there to be an impact on the retail sector and our customers. Notwithstanding this, I am confident that itim’s technology is designed to help retailers weather this storm in a range of critical areas and accordingly, we are well placed to weather the storm alongside them.
Key areas for our software include:
Price and Promotions Optimisation. In the current environment retailers may be tempted to run promotions to drive up sales and sell through inventory, on the other hand retailers may be forced to increase prices to recover costs. By being more strategic retailers could maximise cash margin without damaging competitive positioning. itim successfully works with over 30 retailers globally on price and promotions optimisation with our industry leading software.
Digital Supplier Collaboration. Retailers can deliver cost savings by closer collaboration across their trading relationships. There are many areas of opportunity such as consignment stock models, drop shipment, reducing payment costs, improved supplier debits, data collection and reduced administration, itim has a digital hub that can deliver this.
Stock Optimisation. For the last 10 years, we believe low interest rates, have allowed retailers to be more casual about stock holdings. We believe this is because excess stock may appear to be a good hedge against inflation, but it also ties up cash. We now know from our customers that the P&L impact of excess stock is about 11% of the cost of the stock (in terms of stock handling and distribution costs across the retail network). itim has expertise and experience in helping reduce stocks, including helping move stock holdings back up the supply chain.
Home Delivery Charges. itim can reduce cost of delivery, as despatch from store is now often cheaper than despatch from central warehouses. Our research suggests most national retailers’ customers live within 15 minutes from their stores. We have demonstrated improvements in profit for our customers from this simple shift. We believe itim’s ‘shop local’ business model combined with a delivery route manager for local deliveries is proving to be a success with our clients.
The Directors believe it is our job is to ensure these messages are clearly understood by our existing and potential clients and that we have the resources to deliver services to support them as needed. This is why we have invested heavily in headcount and product development since our IPO and have been prepared to do this despite a short term impact on profits.
Against this background, notwithstanding some near term contract delays, I am optimistic that itim is well placed to respond to the challenges presented in the year ahead.
As always I am indebted to all of our staff for the enormous effort and skill that they deploy every day for itim and our clients.
I remain confident that we will continue to see a continued uplift in revenues, particularly in meeting our objectives related to growth of ARR. However, we remain mindful of the economic challenges facing all companies in the next twelve months and look to the future with cautious optimism.
Chief Executive Officer
20th September 2022